TOPLINE:
The One Big Beautiful Bill (OBBB) repealed about $100 billion in subsidies for home energy modifications that would have mostly benefited upper middle-income households at the expense of other Americans.
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:
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 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.
This memo is part of the One Big Beautiful Booklet, a collection of more than 60 memos that examine and summarize the major aspects of the One Big Beautiful Bill – the signature legislative achievement of President Trump and the 119th Congress.
