Beginning on Sunday, the Senate has begun discussing its draft of the budget reconciliation bill. On Tuesday, the bill was passed in a 50-50 vote, with the tie breaker cast by Vice President Vance. Now, the legislation heads for approval in the House. Directly at threat in these conversations are the four building electrification-related tax credits highlighted in Table 1 and supported by the Inflation Reduction Act (IRA). Together, these tax credits have already provided financial benefits to millions of households, with the potential for years of ongoing pocketbook savings. This week’s digest will highlight success stories of building decarbonization technologies and homeowner and homebuilder savings that were captured due to the passage of these tax credits.
Table 1: Building Electrification and Decarbonization Tax Credits
| Tax Credit | Tax Credit Name | Tax Credit Details |
| 25C | Energy Efficient Home Improvement Credit | 30 percent tax credit, up to $3,200, for home improvements made through 2032, including energy efficiency improvements, residential energy property, and home energy audits. |
| 25D | Residential Clean Energy Tax Credit | 30 percent tax credit for households installing renewable energy — battery storage, geothermal heating, rooftop solar, and wind power — from 2022 through 2032. |
| 45L | New Efficient Home Credit | Incentives for homebuilders, for $2,500-5,000 for single family, manufactured, and multifamily homes from 2023 through 2032. |
| 179D | Energy Efficient Commercial Buildings Deduction | Incentives for owners and designers of qualified commercial buildings owned by specified tax-exempt entities from 2023 through 2032. |
Sources: Internal Revenue Service, ENERGY STAR.
Energy Efficient Home Improvement Credit (25C) in Illinois and Maryland
A CNBC story published in April 2025 highlighted two successful implementations of 25C, one in Illinois and another in Maryland. The Illinois homeowner purchased her property in 2019 and paid $5,700 for energy efficiency projects including weatherization via added insulation and ductwork sealing. In the end, the homeowner received $1,200 through 25C’s weatherization provision, in addition to immense savings in her energy bills — including $209 difference between her December 2024 and December 2022 heating bills and a $172 difference between her January 2025 and January 2023 bills.
Similarly, the Maryland homeowner plans to claim 25C on his 2025 tax return, expecting to receive $5,000 on his $6,000 insulation and air sealing project. In 2023, 2.3 million homeowners claimed 25C on their tax returns. On average, the Treasury Department reported a cost recoupment of $880.
Residential Clean Energy Tax Credit (25D) in Washington DC
Earlier this year, Buildings Hub published a digest featuring a newly electrified home in Northwest DC, a project spearheaded by the homeowners, Kim and Charlie, and supported by local nonprofit Electrify DC.
The couple, via Electrify DC, were connected to a variety of contractors able to pursue the whole-home electrification they were looking for, including rooftop solar. In total, Kim and Charlie’s home features 16.2 kilowatts of solar generation capacity, which more than qualified them to claim 25D and made their energy bills more affordable. Their visible solar project and participation in Electrify DC’s demonstration site initiative adds to their neighborhood’s recognition of the value of this project, and other similar projects, in terms of their financial and environmental impacts.
New Efficient Home Credit (45L) Nationwide
A February 2025 analysis released by ACEEE highlighted the broad impacts of 45L, specifically its visible driving of homebuilders’ construction of efficient new homes. Namely, in 2024, almost 350,000 new energy efficient homes were constructed, a sharp increase compared to the about 150,000 built in 2022 and about 200,000 built in 2023. In addition to directly boosting new efficient home construction, 45L also has resulted in reduction in peak electricity demand — leading to a projected reduction of 1,800 MW by 2032 — and a reduction in residential energy bills of about $450 annually.
Importantly, the tax credit is also staunchly supported by the homebuilding industry. In an analysis of 60,000 homes constructed in 2022, Ekotrope estimated homebuilders narrowly missed out on more than $160 million in tax credits, if plans had been shifted to prioritize energy efficiency just a bit more. Indeed, in a 2023 survey conducted by the National Association of Home Builders, five of the top 15 features homebuilders are intending to include in new homes were centered around energy efficiency.
Energy Efficient Commercial Buildings Deduction (179D) (and the Solar Investment Tax Credit) in Mississippi
A key aspect of the IRA’s tax credits is the direct pay provision, allowing public entities like schools and local governments to access more funding for efficiency upgrades. Further, the IRA’s tax credits are stackable, allowing entities to weave incentives together to complete larger, more ambitious projects.
Biloxi Public Schools partnered with Schneider Electric, an energy management company, to secure $810,000 in tax deductions through 179D over the course of two years via multiple energy efficiency projects. (Schools are considered commercial buildings under the tax credit) Moreover, through the solar investment tax credit’s direct pay provision, the school district is also expecting an additional $150,000 for its deployment of rooftop solar.
Leaving Efficiency and Money on the Table
In a tax credit-less vacuum, some of these home improvements would still have occurred. Energy efficiency projects generally provide returns on investments between five and ten years. But these tax credits provide extra monetary incentives to pursue these investments and broaden general recognition about the benefits of energy efficiency projects, in addition to shortening the horizon of that return on investment.
