The IRS issued guidance in the form of answers to FAQs providing initial guidance on several energy credits that are expiring under the One Big Beautiful Bill Act (OBBBA). These FAQs are meant to provide information that taxpayers and tax professionals can rely on to avoid negligence or other accuracy-related penalties.
Key Takeaways
- The OBBBA accelerated termination dates for several of the green energy tax incentives.
- An acquisition alone doesn’t allow the taxpayer to elect to transfer clean vehicle credits.
- A residential clean energy credit can’t be claimed for property installed or constructed after December 31, 2025, even if payment is made for the property on or before that date.
Expiring Energy Credits and Deduction Provisions
The OBBBA accelerated termination dates for several of the green energy tax incentives. Below is a chart found in the FAQs laying out the expiring energy credits and deduction provisions as well as their termination dates.
| 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. |
The FAQs define “acquired” for the clean vehicle credits under sections 25E, 30D and 45W. “Acquisition” is defined as the date a written binding contract is entered into and a payment has been made. Payment includes a nominal downpayment or a vehicle trade-in.
Even though “acquisition” is important, the credit can only be claimed when the vehicle is “placed in service” (i.e., when you take possession of the vehicle). The FAQs state that if the vehicle is considered “acquired” prior to September 30, 2025, the taxpayer will be entitled to take the credit when the vehicle is placed in service, even if after September 30, 2025.
Related to the clean vehicle credits, the FAQs specify that acquisition alone doesn’t allow the taxpayer to elect to transfer the credit (most likely transferred to the dealer selling the vehicle). Taxpayers should wait until they take possession of the vehicle to make the transfer.
The residential clean energy credit under section 25D applies to residential installation of solar and other clean energy incentives. The FAQs state that a credit can’t be claimed for property installed or constructed after December 31, 2025, even if payment is made for the property on or before that date.
The IRS has stated that future guidance will be issued on other provisions impacted by the OBBBA. At Creative Planning Business Services, we’ll continue to keep you informed when this guidance is issued. Schedule a meeting with a tax advisor today to discuss how the timing of the energy tax credits expiring impacts your current and future tax situation.
