The “One Big Beautiful Bill Act” (OBBB) marks a significant shift in U.S. tax policy. Its key focus is making many of the 2017 Tax Cuts and Jobs Act (TCJA) provisions permanent.
It also introduces major changes to the clean energy tax credits established under the Inflation Reduction Act. Here’s what you need to know about the new tax landscape for energy and business.
Accelerated Sunset for Energy Tax Credits
If you were planning to take advantage of energy tax credits, the clock is ticking. The OBBB has accelerated the expiration dates for many popular incentives.
For residential properties, the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit will now expire on December 31, 2025. This includes credits for installing solar panels, solar water heaters, geothermal heat pumps, and a wide range of energy-efficient home improvements.
Commercial buildings and developers also face a shorter timeline. The Energy Efficient Commercial Buildings Deduction is set to expire on June 30, 2026. This means any new construction or major retrofits must be in service by that date to qualify for the deduction.
The bill also puts an end to some vehicle credits. The popular Electric Vehicle Credit, the Previously Owned Electric Vehicle Credit, and the Commercial Electric Vehicle Credit are all being repealed after September 30, 2025. This has created a short window for those looking to purchase and place a vehicle in service.
Permanent Business Provisions and New Deductions
While some energy incentives are ending, the OBBB brings stability and new opportunities for businesses. Many key provisions from the 2017 TCJA are now permanent. This includes the restoration of 100% bonus depreciation for short-lived business investments, which was set to phase out. The law also permanently restores immediate expensing for domestic R&D costs and raises the Section 179 limits.
The act also introduces a few new, temporary deductions to help both businesses and their employees. Effective for tax years 2025 through 2028, businesses can take a deduction for up to $25,000 for tips and $12,500 for overtime pay for certain employees.
This is a big win for industries like hospitality and food service. The law also provides a new deduction of up to $10,000 for interest paid on certain new car loans.
The bill also modifies the business interest deduction, moving it back to the more favorable EBITBA standard. This change increases the amount of business interest expenses that companies are allowed to deduct, providing significant tax relief.
Final Thoughts: Navigating the New Landscape
The “One Big Beautiful Bill Act” has reshaped the financial playing field for everyone from homeowners to large corporations. The accelerated sunset of energy credits means time is of the essence for those who want to take advantage of the remaining incentives. On the other hand, the permanent business provisions offer long-term clarity for future investments and planning.
If you were counting on these credits, it’s a good idea to speak with a tax professional as soon as possible. Understanding the specific dates and eligibility requirements is crucial for making informed financial decisions. Don’t wait until it’s too late to seize the opportunities that remain.