Update on federal funding for clean energy tax credits

The original version of this article was published on June 24, 2025. It was edited most recently on July 23, 2025 to reflect the passing of the budget bill into law.

The Administration’s One, Big, Beautiful Bill became law on July 4, 2025 after months of debate and back-and-forth in Congress. The House released and passed a version of the bill in May, and Senate Republicans released their own draft finance and tax legislation in mid-June. 

The Senate draft is what ultimately became law, gutting many clean energy tax credits provided by 2022’s Inflation Reduction Act (IRA). Many had hoped that Senate Republicans would substantially moderate the House bill’s virtual wholesale repeal of the clean energy provisions of the IRA. And while the Senate bill did moderate some of the clean energy reductions, it did not go as far as many clean energy advocates and businesses had hoped.

What made it in the final law?

The law phases out much of the IRA’s clean energy tax credits on various timelines, including:

• The EV tax rebate, home energy efficiency rebates, for solutions such as insulation, air source heat pump, heat pump water heaters, and related electrical upgrades, and residential rooftop solar tax credits will phase out by or before the end of the year.
• Commercial wind and solar tax credits phase out a little more slowly. The tax credit remains 30% for projects commencing construction before the end of 2025, drops to 18% if construction begins by 2026, and drops to 6% if construction begins by the end of 2027 before phasing out completely in 2028. However, there is forthcoming guidance from the Treasury Department that might make it more difficult for projects to receive tax credits, and projects that are not put in service before 2026 also will face challenges if any of their components are made in countries including China and Russia.
• Nuclear reactors, hydropower plants, geothermal, and battery storage maintain a 30% tax credit through 2033 and then start phasing out.

What is unaffected?

The silver lining to the federal backpedal on clean energy goals is that while EVs, solar, and offshore wind are facing increased headwinds from changing federal policies, most building energy efficiency, electrification, and decarbonization measures remain untouched and with strong support.

This is because the policies encouraging building upgrades, such as building reporting (LBER) and performance standards (BERDO, LL97) are at the state and city level, while the incentives are largely being provided by local utility companies.

While some federal incentives for energy efficiency will go away, these are relatively small compared to average utility incentives, which will continue in the states that have robust utility incentive programs.

And of course, the baseline argument for energy efficiency—using less energy saves you money—will always continue independent of any policies or external incentives.

What’s next for institutions and building owners?

With federal uncertainty and economic headwinds, many institutions are unsure how to fund needed upgrades. We can help with that.

GreenerU helps organizations: 

• Plan ahead now for future equipment failures
• Capture all available utility and regional incentives
• Package capital renewal and deferred maintenance projects with energy efficiency opportunities with low or no up-front cost financing
• Capture all of the co-benefits of decarbonization

If you’re considering a path forward and are concerned about financing options, let’s talk. We’ll help you evaluate options and build a roadmap for resilient, low-carbon buildings—whatever the federal landscape looks like.

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