July 24, 2025
To our valued customers,
Over the July 4th holiday weekend, President Trump signed the “Big, Beautiful Bill,” rolling back several long-standing federal tax credits for residential clean energy and energy efficiency. These tax credits have been a helpful “bonus”, allowing customers to stack incentives from multiple sources.
The rollbacks do not affect utility engagement and midstream rebate programs, as these are primarily funded by ratepayer funds and state-level initiatives i.e. not federally funded. We anticipate that local and state incentive programs will maintain or expand given individual state energy efficiency goals.
Big Beautiful Bill: High Efficiency Product Incentive Impact
Key Takeaways:
- Residential Clean Energy Tax Credits Ending
The Energy Efficient Home Improvement Credit (25C) and the Residential Clean Energy Credit (25D) will be repealed after December 31, 2025. To qualify, homeowners must ensure that purchases are made and work is completed before the end of 2025. - Commercial Incentives Phasing Out in 2026
The Energy Efficient Commercial Buildings Deduction (179D) and the New Energy Efficient Home Credit (45L) will also be repealed, but later in 2026:- 179D will end for construction that begins after June 30, 2026.\
- 45L will no longer apply to properties acquired after June 30, 2026. Builders and contractors – especially those working on multifamily projects – should be mindful of these timelines, as the deadline may create challenges for selling or leasing eligible properties. The repeal of 45L is particularly significant, as it was previously extended through 2032.
- Delays in IRA Program Funding Continue
There is still no clear timeline for when committed funds from the Inflation Reduction Act (IRA) will be distributed to states for the HOME and HEERA programs. These have been on hold since January and are critical for:- HOME: Energy efficiency upgrades
- HEERA: Point-of-sale rebates for high-efficiency HVAC, heat pump water heaters, and appliances.
Currently, 12 states and Washington D.C. have launched at least one of these programs. The remaining 36 states are still waiting on federal funding.
(Idaho and South Dakota declined to participate.)
- Some Positive News for Contractors
The Section 199A small business deduction and 100% bonus depreciation have been made permanent with enhanced benefits. While this doesn’t affect specific product categories, it’s something positive to share with contractors.
Suggested Actions:
- Educate Homeowners Now – Inform homeowners about the limited window for claiming 25C and 25D credits. In some cases, when these credits are combined with local utility rebates, high-efficiency products can cost the same as standard-efficiency ones.
- Make the Case for High-Efficiency Products – Rebated high-efficiency products offer strong value—helping contractors justify higher pricing, increase margins, bundle solutions, and highlight sustainability benefits to homeowners.
- Don’t Ignore High-Efficiency Products – The expiration of federal tax incentives shouldn’t deter promotion of higher-efficiency lines. Some products like heat pump water heaters will become mandatory in mid-2029 due to updated energy efficiency standards.
Thank you for your continued support and partnership.
Ferguson
Sources: EPA ENERGY STAR | ACCA | HARDI | Canary Media | Frost Brown Todd | Home Pros News