Make the Most of These Tax Credits Before Congress Eliminates Them » Yale Climate Connections

Republicans in the U.S. Senate are striving to pass their version of the budget reconciliation bill before Congress breaks for the July 4 holiday. Currently, the bill proposes to eliminate most clean energy tax credits well ahead of their original phase-out date in 2032.

The tax credits, which provide refunds for electric vehicles, electric appliances, energy efficiency upgrades, and more, enjoy significant public backing. In a December 2024 survey, researchers found that 91% of liberal Democrats, 70% of moderate or conservative Democrats, 42% of liberal or moderate Republicans, and 28% of conservative Republicans support rebates for electric vehicles. Additionally, an analysis indicated that red states would gain the most from the incentives for individuals and businesses.

Some expected the Senate to preserve tax credits that the Republican-controlled House of Representatives aimed to cut in their version of the budget bill passed in May, but this has not happened for consumer tax credits related to EVs or home improvements. Nevertheless, senators have yet to vote on the bill. Since the Senate made significant modifications, the bill will need to go back to the House before reaching the President’s desk for approval. Therefore, there is still time for constituents to share their views with Congress regarding the proposed legislation.

Read: 13 tips for lobbying your elected officials about climate change

If the Senate version of the bill is enacted as is, the credits will not expire immediately. Generally, consumers will have 180 days to utilize the credits before they are completely withdrawn.

Replace your combustion engine car with a new or used EV

Under the current Senate version, EV tax credits would expire either 90 days (for used cars) or 180 days (for new cars) after the bill becomes law. This offers consumers a chance to receive up to $4,000 for a used EV and $7,500 for a new one.

Read: Don’t get fooled: Electric vehicles really are better for the climate

The clean vehicle credit is valued at $7,500 and is applicable to new vehicles that:

• Are electric vehicles with batteries of at least seven kilowatt-hours or hydrogen fuel cell vehicles
• Cost less than $80,000 for vans, SUVs, and pickup trucks, or under $55,000 for all other vehicles
• Were assembled in the U.S., Canada, or Mexico
• Meet specific requirements regarding battery component manufacturing and the sourcing of critical minerals used in the batteries.

To qualify for the tax credit, the adjusted gross income of the purchaser(s) must be below $300,000 for those married filing jointly, under $225,000 for head of household status, or under $150,000 for single or married filing separately status.

If you’re looking to buy a used car, similar eligibility criteria apply but with lower income and vehicle cost thresholds. Your adjusted gross income must be under $150,000 if married filing jointly or under $75,000 if single or married filing separately.

For a vehicle to qualify for the credit for previously owned clean vehicles, it must also:

• Meet the requirements for a clean vehicle used in the clean vehicle credit
• Have a model year at least two years older than the date of sale
• Weigh less than 14,000 pounds
• Cost less than $25,000.

This credit amounts to either $4,000 or 30% of the vehicle’s cost, whichever is smaller.

If you run a business or nonprofit, consider investing in an EV for your organization. The commercial clean vehicles credit provides financial returns for businesses and tax-exempt organizations (such as churches and universities) that purchase qualified vehicles. Businesses can receive a credit of $7,500 for small vehicles or up to $40,000 for larger vehicles like school buses or freight trucks.

Put an EV charging station in your home or small business

Currently, the alternative fuel vehicle refueling property credit allows individuals and businesses installing EV charging stations to receive up to 30% (with a maximum of $1,000 for individuals and $100,000 for businesses) of the installation cost as tax credits. However, the Senate bill proposes to eliminate this credit, which would end one year from the passage date.

Improve your home’s energy efficiency with new windows, insulation, and doors

Currently, the energy efficient home improvement credit offers homeowners a tax credit worth 30% of the cost, up to $1,200, for qualifying items such as energy-efficient windows and home energy audits. This cap resets every year, which could be beneficial if the tax credit continues into 2026. However, the bill seeks to terminate these credits 180 days after its passage.

Energy audit

Home energy audits are beneficial for understanding energy usage and identifying potential improvements. The energy-efficient home improvement tax credit covers 30% of the audit cost, capped at $150.

“A home energy assessment should be your first step before making energy-saving home improvements, as well as before adding a renewable energy system,” advises the U.S. Department of Energy.

New wiring

This tax credit also applies to rewiring in older homes that lack the electrical capacity for new electric appliances. Consult with a trusted electrician about whether replacing gas furnaces or other appliances will require electrical upgrades.

Improve insulation in your home

A well-insulated home remains warm in winter and cool in summer, reducing energy costs and potentially allowing for a smaller, less expensive rooftop solar system if chosen.

New windows and exterior doors

Homeowners can receive up to $250 back per exterior door (totaling $500) and $600 total for exterior windows and skylights through the tax credit.

Replace your furnace, AC, and water heater with a heat pump

Heat pumps efficiently cool and heat your home, transferring heat from inside to outside in summer and vice versa in winter. They are generally more energy-efficient than traditional systems and operate on electricity instead of natural gas or oil.

Homeowners are eligible for up to $2,000 annually for qualified heat pumps, water heaters, biomass stoves, or biomass boilers, which is separate from the $1,200 limit on other home improvements.

Various types of heat pumps are available, so it’s advisable to work with a contractor to determine the best fit for your home.

Get a renewable energy system to power your home

While not every home is suitable for a renewable energy system, if yours can support one, the residential clean energy credit can offset some of its costs. Systems that qualify for the credit include:

• Home solar
• Qualified battery storage
• Solar water heating
• Fuel cells
• Geothermal heat pumps
• Small wind energy

The residential clean energy tax credit is 30% of the cost of the qualifying system, including installation. As proposed by the Senate, this credit would expire 180 days post-passage.

Savings will ripple through energy bills

To access these tax credits before they expire, consumers must be ready to invest significant amounts of money in a short timeframe. However, in addition to tax rebates, more energy-efficient homes and vehicles can lead to ongoing savings on utility bills. The current budget reconciliation bill is expected to raise energy costs as the renewable energy sector grapples with halted investments. For those who can afford it, the immediate future may present an optimal moment for energy efficiency improvements.

Read: 10 ways that Trump’s tax bill would undermine his energy promises