The U.S. House of Representatives recently passed a broad tax and spending package unofficially referred to as "The One, Big, Beautiful Bill." Among its many provisions are proposed changes that would significantly impact two popular federal tax incentives: clean vehicle credits and energy-efficient home improvement credits. If the legislation becomes law in its current form, these incentives would expire at the end of 2025, years earlier than previously scheduled. For individuals planning to purchase an electric vehicle (EV) or make energy-efficient upgrades to their homes, the proposed changes may accelerate their timeline. Acting sooner rather than later could mean locking in tax savings before these opportunities are phased out.
Electric Vehicle Credits at Risk The House bill would eliminate two major clean vehicle tax credits after December 31, 2025:
- New Clean Vehicle Credit (IRC Section 30D) – Currently, this credit allows qualifying buyers to receive up to $7,500 for new clean vehicles, which include fully electric vehicles, plug-in hybrid electric vehicles, and hydrogen fuel cell vehicles. The amount of the credit is based on battery component and mineral sourcing criteria. Vehicles that meet only one of the two requirements may still qualify for a $3,750 credit.
Under current law, the credit is available through 2032. However, if the House bill is enacted, that timeline would be shortened by seven years. Eligibility criteria for the new vehicle credit include:
-
- Final vehicle assembly must take place in North America.
- Manufacturer Suggested Retail Price (MSRP) limits apply: $80,000 for trucks, SUVs, and vans, and $55,000 for other vehicles.
- The buyer must meet income thresholds based on modified adjusted gross income (MAGI): $300,000 for joint filers, $225,000 for heads of households, and $150,000 for others.
- Used Clean Vehicle Credit (IRC Section 25E) – Buyers of used electric vehicles (EVs) may qualify for a credit of up to $4,000, or 30% of the sale price, whichever is lower. The vehicle must be at least two model years old and meet certain battery and safety standards. To qualify:
- The sale price must be $25,000 or less.
- MAGI limits apply: $150,000 for joint filers, $112,500 for heads of households, and $75,000 for others.
Both credits are nonrefundable and cannot be carried forward, but taxpayers may elect to transfer the credit to a dealership at the time of purchase. This can reduce the up-front cost of the vehicle, though only two transfer elections are allowed per year. Form 8936 must be filed with the taxpayer’s return or submitted when transferring the credit. The legislation includes a limited exception for smaller automakers—those that have sold fewer than 200,000 eligible clean vehicles—allowing them to retain eligibility through 2026.
Energy-Efficient Home Improvement Credits May Also End The House bill would also eliminate energy-efficiency tax credits for residential upgrades after 2025. These include credits for improvements like qualifying exterior windows, doors, insulation, and high-efficiency heating and cooling systems. Under current law, taxpayers can claim a credit equal to 30% of the cost of eligible improvements under IRC Section 25C, with specific annual limits:
- Up to $600 for Energy Star–certified windows and skylights
- Up to $500 total for exterior doors (no more than $250 per door)
Currently, these credits are available annually through 2032. If enacted, the bill would cut that timeframe short by seven years, limiting taxpayers’ ability to spread improvements over time while still benefiting from the credit.
What This Means for Taxpayers If you’ve been considering purchasing an EV or making energy-saving home upgrades, the timing of your decision could make a material difference. Assuming the legislation is signed into law in its current form, 2025 would be the final year to claim these incentives. Taxpayers planning these purchases should factor in lead times for vehicle delivery or contractor availability to ensure they qualify before the deadline. It’s also important to retain proper documentation, including:
- Receipts and certifications for home improvement products
- A copy of the purchase agreement for EVs
- Income documentation and a completed Form 8936 for credit claims
Because the Senate is still reviewing its own version of the bill, and reconciliation between the two chambers is required, there’s no guarantee that the current provisions will remain unchanged. But even the possibility of early expiration should prompt proactive planning for those who were already weighing these investments.
With federal incentives potentially winding down, the window to take advantage of these valuable tax credits may be closing. Whether you're purchasing an electric vehicle, upgrading your home's energy efficiency, or simply weighing your options, smart tax planning is essential. Don’t wait until these opportunities are gone. The tax professionals at Reynolds + Rowella are ready to help you act strategically, navigate the rules with confidence, and maximize every dollar of potential savings. Contact us today to make the most of the credits while they’re still available.
Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve. Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.
