Energy Efficient Home Improvement Credit Repeal

Background

The Inflation Reduction Act (IRA) of 2022, shifted the cost of certain government-favored home energy products away from the households that purchase them and onto other Americans. The Residential Clean Energy Credit offset 30% of the costs of government favored products such as solar panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and batteries. The Energy Efficient Home Improvement Credit offset 30% of the costs of politically favored energy efficient technologies with annual limits. The New Energy Efficient Home Credit subsidized up to $5,000 related to building houses that meet certain energy standards of the federal government.

What OBBB Did

• Repealed the Residential Clean Energy Credit as of December 31, 2025.
• Repealed the Energy Efficient Home Improvement Credit as of December 31, 2025.
• Repeals the New Energy Efficient Home Credit on June 30, 2026.

Why It Matters

• Rolling back these subsidies will reduce the deficit by about $100 billion over a 10-year period (2025-2034), according to JCT estimates.
• Whenever the tax code advantages one set of people or businesses, others are put at a relative disadvantage. In this case, the burden falls on households that do not use politically favored household energy products.

Where Can I Find the Changes?

OBBB Section 70505-70506, 70508; 26 U.S. Code § 25C, 25D, 45L.

Bottomline

People should be free to build or modify their homes based on their own preferences, but other Americans should not be forced to subsidize those decisions. In 2022, lawmakers who passed the IRA were wrong to impose the government’s home energy preferences on families. Last year, Congress was right to reverse the subsidies.