With the “Big Beautiful Bill” signed into law, the writing is on the wall: Residential tax credits for solar, energy efficiency, and electric vehicles are expiring rapidly—but opportunities exist for households that act quickly.
Here’s the summary of what this means for homeowners:
- Electric Vehicles: Consumers have until September 30 to acquire a qualifying EV and utilize the tax credit. The residential EV charger tax credit goes away June 30, 2026.
- Solar: Households have until the end of 2025 to complete a solar system to claim the tax credit; if you’re not already in process with a contractor, meeting this deadline could be difficult.
- Energy Efficiency: Households also have until the end of 2025 to claim the tax credit for energy audits, heat pumps, and heat pump water heaters, better windows and doors, and other energy efficiency practices. This is a tight timeline, but doable if you start now.
EV’s: Leasing and Buying with Valuable Incentives
Federal tax credits for both new and used electric vehicles remain in place until SEPTEMBER 30. And to displace any concern of whether the tax credits will still be there when you file your taxes next spring, all credits can be taken as a point of sale reduction in vehicle purchase price.
Tax credit availability varies by vehicle model, and are pegged to manufacturing and battery sourcing rules, but many models qualify for between $3,750 and $7,500 in rebates. There’s also a $4,000 tax credit for used EVs, which like the new EV tax credit, can be taken as a point of sale reduction in purchase price
In many cases, leasing is an even better deal, as the full $7,500 credit applies to all models, regardless of manufacturing and battery sourcing requirements. Many manufacturers are also offering special financing rates and additional cash-back incentives, that coupled together, make leasing more appealing than outright ownership. These incentives make EVs far more competitive with gas-powered cars than sticker prices alone might suggest.
READ MORE: Why We Drive Electric by Joleen and Jim Jansen, rural Elkader
Solar: A Smart Investment with Strong Payback
Solar is a great financial investment. For many residential customers, and assuming the 30% tax credit is available, the return on investment is as short as seven years. For businesses and agriculture producers who can take advantage of grants and business depreciation, the payback can be as short as a few years. (More for farms and businesses here.)
The payback period depends on your local situation–electric rates, installation costs, losses due to shading or panel orientation, and utility net metering rules. For most Iowans, the current environment offers an enticing mix of low installation costs and extremely consumer-favorable net metering rules.
Net metering—the system that credits customers for excess electricity they produce—is set to change in 2027.
Right now, Alliant and MidAmerican customers sell surplus power back to the grid at the full retail rate the utilities charge residential customers. In 2027, the Iowa Utilities Board will oversee an evolution of full net metering to a regime known as value of solar, which will surely be less generous. By installing solar before the net metering change, you’ll be grandfathered into the existing system, locking in a better deal and maximizing savings.
Under the Inflation Reduction Act, homeowners can claim the federal tax credit equal to 30% of their total investment. The credit directly reduces the amount of federal income tax you owe, and if you don’t have sufficient tax liability for the year in which the system was built, the remaining unused portion can be carried forward and drawn down over future tax years. But that 30% off will disappear at the end of the calendar year.
If you’ve been on the fence, now is the time to move forward. Time is running short, so we suggest you reach out to contractors for quotes. Meeting the December 31 deadline for solar is mainly a question of whether your contractor can guarantee the system will be fully installed by the end of the year, and that you have paid the contractor in full.
The bill (page 464) states the residential solar credit is not allowed “with respect to expenditures made after December 31, 2025.” Prior IRS guidance is clear that a solar system must be fully installed by the stated deadline, but it does not state the system must be operational, suggesting that a residential solar system may be eligible for the tax credit if fully installed and paid for by the end of 2025, even if utility interconnection delays have prevented it from being operational by December 31. Given the complexity of meeting these deadlines, we strongly recommend you do your homework to ensure you’re able to take advantage of the tax credit.
Heat Pumps and Energy Efficiency: Energy Efficiency Upgrades for your Home
Heat pumps have the potential to offer substantial operational cost savings, while increasing home resale values and home comfort. Heat pumps can be used for both space heating and cooling, as well as for water heating. The tax credit for heat pumps is 30% up to $2,000. In addition, there’s a 30% tax credit up to $1,200 for insulation, exterior doors and windows, and electrical panel upgrades.
In many cases, the upfront cost difference between a standard central air conditioner and an upgraded heat pump version is narrowed or fully offset by the federal tax credit. The same can be said for heat pump water heaters. When the federal tax credit is combined with local utility incentives, the cost of installation for a heat pump version is less than gas, and the cost of operation of a heat pump water heater is often equal to or less than a comparable natural gas version.
Like the solar tax credit, this one too is on the chopping block, so moving ahead now ensures you’re able to take advantage of the 30% credit. Talk to your HVAC contractor and make sure they’ve selected a model eligible for the tax credit.
READ MORE: Is a Heat Pump Right for Your Home? by Paul Cutting, Energy Planner, Winneshiek Energy District
Act Now While Incentives Remain in Place
Whether it’s installing solar panels, upgrading your home’s heating and cooling, or driving electric, now is the time to explore options and save before the money’s gone.
Posted: July 11, 2025
