3 Clean Energy and Vehicle Tax Credits Ending Soon
For some people, the desire to reduce their carbon footprint is reason enough to purchase an electric vehicle or make energy-efficient home improvements. Federal tax credits—which reduce the taxes you owe dollar for dollar—have made these changes even more attractive. But with the passage of the "One Big Beautiful Bill" Act (OBBBA), these perks will be ending as early as September 30, 2025.
Here's a look at three tax credits you can take advantage of now and how to potentially qualify for each while you still have time.
1. Clean vehicle credits
Expires: September 30, 2025
Originally set to expire January 1, 2033, these tax breaks will be the first to end under the new law. In order to take advantage of the clean vehicle credits, you must acquire the vehicle by the expiration date.
For new vehicles
- Annual tax credit: up to $7,500
- For vehicles acquired between January 1 and April 17, 2023:
- Base credit: $2,500
- Additional credit: $417 for vehicles with a battery capacity at least 7 kilowatt hours, plus $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours, up to an additional $5,000
- For vehicles acquired after April 18, 2023:
- Meets battery components requirement: $3,750
- Meets critical minerals requirement: $3,750
- Meets both requirements: $7,500
- For vehicles acquired between January 1 and April 17, 2023:
- Qualifications to be eligible:
- Vehicle must have undergone final assembly in North America.
- Manufacturer's suggested retail price (MSRP) cannot exceed:
- $80,000 for pickup trucks, sport utility vehicles, and vans
- $55,000 for all other vehicles
- Your modified adjusted gross income (MAGI) cannot exceed:
- $300,000 for married couples filing jointly and surviving spouses
- $225,000 for heads of household
- $150,000 for everyone else
For used vehicles
- Annual tax credit: 30% of the sale price up to $4,000
- Qualifications to be eligible:
- Vehicle must be purchased for personal use and not resale.
- Buyer can't be the original owner and can't be claimed as a dependent on someone else's tax return.
- Buyer may not have claimed credit for another used clean vehicle in the previous 3 years before the purchase date.
- Your modified adjusted gross income (MAGI) cannot exceed:
- $150,000 for married couples filing jointly and surviving spouses
- $112,500 for heads of household
- $75,000 for everyone else
2. Energy-efficient home improvement credit
Expires: December 31, 2025
Like the clean vehicle credits, the original expiration date was January 1, 2033. To claim the home improvement credit, you must have lived in the home and performed the energy-efficient upgrades by the expiration date.
- Annual tax credit: 30% of qualified improvements, up to $3,200
- If you work from home and claim a home office deduction, your tax credit may be reduced:
- Business use up to 20%: eligible for full credit
- Business use more than 20%: limited to the share of expenses allocated for nonbusiness use
- Includes:
- Doors: limited to $250 per door, $500 in total
- Windows and skylights: limited to $600 in total
- Heat pumps, water heaters, and biomass boilers and stoves: limited to $2,000 in total
- Home energy audit: limited to $150 in total
- If you work from home and claim a home office deduction, your tax credit may be reduced:
- Qualifications to be eligible:
- Home must be your primary residence.
- Home must be located in the United States.
- Improvements must be made to an existing home.
3. Residential clean energy credit
Expires: December 31, 2025
These clean energy credits are set to end nine years earlier than proposed and no longer include phase-down periods. You must own the home and make improvements by the expiration date to claim the tax credits.
- Annual tax credit: up to 30% of qualified improvements with no maximum, but you can carry forward the excess amount for use in future tax years.
- As with the energy-efficient home improvement credit, claiming a home office deduction may reduce your maximum limit.
- Credit cannot exceed taxes owed.
- Includes:
- Solar water heaters
- Solar electric panels
- Wind turbines
- Battery storage technology
- Geothermal heat pumps
- Fuel cells (primary residence only): Credit is limited to $500 per each half-kilowatt of capacity or up to $1,667 per half-kilowatt for multiperson households.
- Qualifications to be eligible:
- Home must be your primary residence, whether owned or rented, or second home so long as it's not used as a rental property.
- Home must be located in the United States.
- Improvements may be made to either a new or an existing home.
What about state tax credits?
Though tax credits for clean energy improvements and vehicles will no longer be available at the federal level after 2025, you may still qualify for some relief on your state taxes. For current state tax credits and deductions, check your ZIP code using the Database of State Incentives for Renewables & Efficiency®. Even if the tax credits aren't your motivation, it's always a good idea to consult a tax advisor to help ensure you capture any benefits available to you.
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