The IRS on Aug. 21 issued a fact sheet containing frequently asked questions about Biden-era clean energy tax credits and deductions for individuals and businesses soon to expire under the One Big Beautiful Bill Act, including incentives for home energy upgrades, electric vehicles, and energy-efficient buildings.
President Donald Trump’s tax law, which was enacted on July 4, rolled back a number of clean energy tax breaks included in the Inflation Reduction Act of 2022. The incentives don’t end right away, however.
Right off the bat, FAQ No. 1 is: Which energy credits and deductions are expiring under OBBB, and what are their new termination dates?
The IRS says, “OBBB accelerated the termination of several energy credit and deduction provisions.” The agency then notes that the following incentives expire the soonest:
| Code section | Section title | Termination date |
|---|---|---|
| 25C | Energy efficient home improvement credit | The credit will not be allowed for any property placed in service after December 31, 2025. |
| 25D | Residential clean energy credit | The credit will not be allowed for any expenditures made after December 31, 2025. |
| 25E | Previously-owned clean vehicles credit | The credit will not be allowed with respect to any vehicle acquired after September 30, 2025. |
| 30C | Alternative fuel vehicle refueling property credit | The credit will not be allowed for any property placed in service after June 30, 2026. |
| 30D | New clean vehicle credit | The credit will not be allowed for any vehicle acquired after September 30, 2025. |
| 45L | New energy efficient home credit | The credit will not be allowed for any qualified new energy efficient home acquired after June 30, 2026. |
| 45W | Qualified commercial clean vehicle credit | The credit will not be allowed for any vehicle acquired after September 30, 2025. |
| 179D | Energy efficient commercial buildings deduction | The deduction will not be allowed with respect to any property the construction of which begins after June 30, 2026. |
There are six other FAQs in the fact sheet.
In an executive order signed on July 7, Trump instructed the Treasury Department to strictly enforce the termination of the clean energy production and investment tax credits under sections 45Y and 48E in the tax code for wind and solar facilities.
He also ordered Treasury Secretary Scott Bessent to issue new and revised guidance to ensure that policies concerning the “beginning of construction” aren’t circumvented, including by preventing “the artificial acceleration or manipulation of eligibility” and by restricting the use of broad safe harbors unless a substantial portion of a subject facility has been built, according to the executive order.
Last week, the IRS issued new guidance for wind and solar energy projects, changing how they qualify for energy tax credits. Projects must now show significant physical work started before July 5, 2026.
“This guidance marks a significant shift in longstanding tax equity practice by eliminating the long-relied-upon 5% safe harbor for most projects and requiring taxpayers only to demonstrate physical work of a significant nature to establish construction start,” top 40 accounting firm Novogradac said in an Aug. 20 analysis of the new IRS guidance. “While this change upends the status quo, the overall framework for physical work remains familiar, consistent with prior IRS guidance. It applies prospectively, starting Sept. 2, 2025. IRS notices 2013-29, 2018-59 and 2022-61 will continue to apply in their entirety for projects that started construction before Sept. 2.
“By tightening the rules to focus on demonstrable construction progress, the IRS signaled an emphasis on substance over form,” the Novogradac analysis continues. “Importantly, however, the guidance maintains the four-year continuity safe harbor and carves out a limited exception to the elimination of the 5% safe harbor for low-output solar facilities with nameplate capacity of 1.5 megawatts (MWs) alternating current (AC), ensuring that smaller projects, such as rooftop solar, retain flexibility. The result is a more stringent but manageable set of rules that project investors and developers will be able to successfully navigate by adapting.”
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