Inflation Reduction Act: Clean Energy Tax Credits Explained
Here at the Alliance for Competitive Power (ACP), we're excited to walk alongside you as the energy landscape shifts beneath our feet.
The Inflation Reduction Act (IRA) was more than a headline it was your ticket to lower costs and greater choice. However, as we navigate February 2026, a new legislative chapter has arrived. The "One Big Beautiful Bill" (OBBB) Act, signed in July 2025, has significantly accelerated the timeline for many of these benefits in the worst ways.
How the Inflation Reduction Act Puts Money Back in Your Pocket
When Congress first greenlit the Inflation Reduction Act, it opened doors for everyday folks and businesses to tap into nearly two dozen targeted tax credits. By investing in your home or business, you can:
Slash up-front costs for solar panels, wind turbines, and battery storage.
Support innovation that helps your neighborhood go green.
Fuel local job creation and boost American manufacturing.
If you’re curious about how competition delivers lower bills and smarter service, we invite you to explore Energy Competition Success: How Open Markets Deliver Savings right here on our site.
Important 2026 Update: The OBBB Act
While the original IRA envisioned credits lasting through 2032, the One Big Beautiful Bill Act (Public Law 119-21) has moved the goalposts. Many residential credits that were once long-term are now approaching their final deadlines.
Unlocking Clean Energy: Credits and Direct Benefits for Everyone
For folks looking to go solar, the Residential Clean Energy Credit (Section 25D) remains a golden ticket but only for a very short window. You can still claim 30% of the installation price for systems installed by December 31, 2025.
Note for 2026: Under the new OBBB rules, the Section 25D credit is currently not allowed for expenditures made after December 31, 2025. If you missed the year-end cutoff, you may still be able to benefit through third-party leases or Power Purchase Agreements (PPAs), though the direct tax credit for ownership has effectively expired.
Other credits impacted by the 2025/2026 transition include:
Home Upgrades: The Energy Efficient Home Improvement Credit (Section 25C) for heat pumps and insulation also terminated for property placed in service after December 31, 2025.
Electric Vehicles: New and used clean vehicle credits (Sections 30D and 25E) expired as of September 30, 2025.
Direct Pay: Innovative direct pay and transferability features still allow nonprofits and local governments to benefit from remaining commercial credits, though new restrictions on "Prohibited Foreign Entities" took effect in early 2026.
Opportunity Broadened: Recent Policy Changes
The shift toward domestic production continues to move the needle. According to Department of Energy data, tax credits have sparked clean energy growth in over 30 states.
However, the "One Big Beautiful Bill" Act imposes stricter "Foreign Entity of Concern" (FEOC) rules. Projects beginning construction in 2026 must navigate complex sourcing requirements to prove components aren't controlled by prohibited foreign entities. Furthermore, the clean energy investment tax credit for solar and wind is now on a strict countdown to end by December 31, 2027.
Why Open and Competitive Energy Markets Matter
In places where you get to pick your power provider, competition is a shield against rising costs. Even as federal incentives shift, consumers in "restructured" states enjoy more freedom to find green options that fit their budget, as our FTI Study Results illustrate.
If you’re wondering how power rates are set, check out our detailed ACP guide.
How to Grab Remaining Incentives Before They’re Gone
Check 2025 Carry forwards: If you installed solar or energy-efficient gear in 2025 but didn't have enough tax liability, you can still carry forward those credits to your 2026 return.
Act on Commercial Projects: Businesses can still qualify for solar and wind credits if construction starts before July 4, 2026, or the system is active by December 31, 2027.
Explore Battery Storage: Good news the tax credit for standalone battery storage was largely preserved and remains a powerful way to secure backup power.
Shop Around: In competitive states, use your ACP Home Page resources to find suppliers offering "Green Power" plans that leverage these incentives.
FAQ: Energy Tax Credits in 2026
Can I still get a credit for solar panels in 2026? Not directly as a homeowner under Section 25D, as it expired at the end of 2025. You may look into commercial-scale community solar or leasing options.
What about heat pumps? The federal 25C credit ended in 2025, but many state-level rebates and utility-specific incentives are still very much alive.
When do the solar and wind manufacturing credits end? Most will be fully eliminated for projects entering service after 2027.
Does competition still matter? More than ever! Open markets drive companies to innovate around these new federal restrictions. See our blog post for why choice is key.
Conclusion: Step Into a Brighter Energy Future
The energy world is shifting fast, and the OBBB Act has certainly added a sense of urgency. While some windows have closed, the push for a cleaner, more competitive marketplace continues. Don’t let the complexity stop you from finding savings!
Reach out to us any time via the ACP Contact page. We’re in this together, working to build a fairer energy market for everyone.
