The so-called One Big Beautiful Bill could lead to a big, mad dash for consumers looking to buy electric vehicles or install rooftop solar before federal tax incentives expire in the coming months.
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Led by Republicans on Capitol Hill and signed into law by President Donald Trump on July 4, the 940-page legislation affects taxes and spending on multiple elements of the nation’s economy — including the energy and auto industries. It rolls back major pieces of 2022’s Inflation Reduction Act that was pushed through by congressional Democrats and former President Joe Biden.
What the bill means for EVs
Under the new legislation, federal tax incentives for buying an electric vehicle will now expire Sept. 30. That includes a credit of up to $7,500 on a new EV, or $4,000 for a used one. The credit for buying and installing a home charging station will end June 30, 2026.
On the other hand, the bill enables taxpayers to deduct up to $10,000 in auto loan interested from their taxable income for the 2025 through 2028 tax years. The deduction only applies to cars made in the U.S. and the maximum deduction phases down when income surpasses $100,000.
Auto analysts expect the pending elimination of the $7,500 tax deduction will result in a dash from prospective buyers of electric vehicles.
“Everyone who was considering an EV, was on the fence for an EV and all the people who absolutely had planned to buy an EV between now and Sept. 30 will all be much more likely to buy one because they want to take advantage of the incentive” before it expires, said Karl Brauer, executive analyst at iseecars.com.
But Brauer said car dealers now face a conundrum: They will likely try to get more EVs on their lots in anticipation of higher demand in the coming months, but at the same time they don’t want to order so many that they can’t sell them all before the incentives dry up.
“If (dealers) can get them sold before Sept. 30 with that extra demand happening, great,” Brauer said. “But if you can’t get them all sold before Sept. 30, you’re going to probably be stuck with them.”
Brauer’s advice for those considering buying an electric vehicle: “You might want to do it sooner than later because you can assume that by, say, Sept. 20 and Sept. 25 a lot of these cars will have been purchased so dealers will not be ordering new ones and your choices will be limited.”
The elimination of the EV federal tax credit comes almost two years after California phased out its state incentive program.
Closed in November 2023, the Clean Vehicle Rebate Project had offered up to $7,500 on the purchase or lease of an EV, plug-in hybrid or hydrogen fuel cell vehicle on a first-come, first-serve basis for California residents who met income requirements.
There have been rumblings that Gov. Gavin Newsom might bring back the rebate program if federal tax incentives went away.
In an email response to the Union-Tribune, a spokesperson for the Newsom administration said discussions between the governor’s office and legislators in Sacramento about extending the state’s cap and trade program “could include new zero-emission vehicle incentives,” but did not elaborate.
California has set aggressive EV goals.
Five years ago, Newsom issued an executive order that mandates the elimination of sales of all new gasoline-powered passenger vehicles throughout the Golden State by 2035. And next year, the first of a series of state-imposed targets will start rolling out.
Under standards passed by the California Air Resources Board, at least 35% of model year 2026 passenger cars and trucks sold in the state must be electric vehicles, plug-in hybrids or hydrogen fuel cell vehicles. The numbers ramp up each year, going to 68% in 2030 and 100% by 2035.
Miguel Cornelio of Stellar Solar works on a solar panel installation in North Park in April 2024. The full residential tax credit for rooftop installations expires at the end of this year under new federal legislation. (K.C. Alfred / The San Diego Union-Tribune)
What the bill means for rooftop solar
The legislation eliminates the 30% federal tax incentive on Dec. 31 for homeowners who want to put solar panels on their roofs under Section 25D of the U.S. Tax Code.
Michael Powers, founding partner of Oceanside-based Stellar Solar, said there is “no question” there will be a rush from residential customers who want to beat the expiration date.
Summer is typically the busiest time of year for rooftop solar companies, Powers said, because customers see their electricity bills rise as hot weather results in a spike in air conditioner usage, swimming pool filters, etc., so making the investment in solar looks more financially attractive.
The looming closure of the federal tax break will compress the schedule for installations
“It’s going to be pretty tight,” Powers said because customers not only have to line up a contractor but also obtain inspection permissions from San Diego Gas & Electric, face potential approvals from homeowners associations and get the installation completed by the end-of-the-year deadline.
“Let’s be honest, the cutoff is really like the middle of October,” to realistically get a project done in time, Powers said, “so you’re really looking at the next three months.”
However, commercial solar installations, as well as residential systems that are owned by third parties — such as leased systems — use Section 48E of the tax code. Under the new legislation, the 30% federal tax credit will remain available for those systems until the end of 2027, provided they are put into place by then.
“These larger commercial systems just have longer lead times” to get completed, Powers said.
The solar industry blasted the bill that passed the House of Representatives 218-214 and the Senate 51-50, with Vice President JD Vance casting the tie-breaking vote, as short-sighted, saying it will impede solar adoption and jeopardize grid stability when demand from artificial intelligence is growing.
“Solar and storage are America’s best bet to lower energy costs, build long-term energy resilience, and break free from the grip of foreign energy dependence,” Solar Energy Industries Association President Abigail Ross Hopper said. “It is especially disheartening to witness the total disregard for the thousands of small businesses in the residential solar sector that were given only months to reinvent themselves.”
But the bill’s supporters said renewable energy sources such as solar and wind, as well as electric vehicles, have received federal incentives long enough.
The legislation “goes a long way toward putting an end to the misguided Biden-era (Inflation Reduction Act), which has made our energy more expensive and less reliable,” said American Energy Alliance president Tom Pyle. “Eliminating the EV tax credit marks a major win for those of us who have been advocating for years that consumer choice — not government mandates — should shape the American auto market.”
Powers of Stellar Solar, which has served the San Diego and Orange County area for more 25 years, said while the changes will be harder on smaller companies than larger ones, “those of us in the solar energy business have been through things like this before … and the good news is we can still turn on change directions a lot faster than large utility companies can.”
According to EnergySage — a company that offers comparison pricing for products such as solar, energy storage and heat pumps — the 30% federal tax credit averages out to $9,000 in savings.