Energy Freedom Act Systematically Repeals Dozens of Clean Energy Tax Credits Starting in 2026

The aptly named Energy Freedom Act is a sweeping piece of legislation that essentially hits the reset button on nearly every major federal tax incentive related to clean energy, energy efficiency, and low-emissions vehicles. If you or your business have been planning around tax credits for solar, electric cars, or energy-efficient home upgrades, you need to pay attention, because this bill systematically repeals dozens of provisions in the Internal Revenue Code.

The Great Tax Credit Cleanup, Kicking Off in 2026

What does this bill actually do? It gets rid of a huge chunk of the tax code that supports energy transition. The key takeaway is that most of these repeals are scheduled to take effect for tax years beginning after December 31, 2025. This isn’t an immediate change, but it’s a clear signal that the financial support structure for clean energy is planned to be dismantled in the near future. The bill targets everything from Section 25C (energy-efficient home improvements) to Section 48E (clean electricity investment credit), making technical changes across the board to wipe these incentives off the books (Sec. 2 through Sec. 21).

What It Means for Your House and Your Car

For the average person juggling a mortgage and rising utility bills, the most immediate impact comes from the residential repeals. If you were thinking about installing solar panels, a geothermal heat pump, or even just making major energy-efficient upgrades to your home, the tax credits that help offset those costs are slated to disappear. Specifically, the Residential Clean Energy Credit (Section 25D) is gone after 2025 (Sec. 3), and so is the Energy Efficient Home Improvement Credit (Section 25C) (Sec. 2).

If you’re driving or considering an electric vehicle (EV), this bill pulls the plug on financial help. The tax credit for buying a new clean vehicle (Section 30D) and the credit for buying a previously-owned clean vehicle (Section 25E) are both repealed starting in 2026 (Sec. 6, Sec. 4). This means that a financial incentive that can be worth up to $7,500 for a new EV purchase will vanish, making the upfront cost of going electric significantly higher for consumers.

The Impact on Business and Industry

This bill doesn't just affect homeowners; it radically changes the financial landscape for businesses in energy production and manufacturing. For those in the renewable sector, the credit for electricity produced from certain renewable resources (Section 45) and the new clean electricity production credit (Section 45Y) are both repealed (Sec. 10, Sec. 17). This removal of production tax credits is a major blow to the economics of wind, solar, and geothermal projects that rely on these incentives for financing.

Furthermore, the bill eliminates financial support for next-generation energy and industrial processes:

• Nuclear Power: The zero-emission nuclear power production credit (Section 45U) is repealed (Sec. 13).
• Hydrogen: The clean hydrogen production credit (Section 45V) is repealed (Sec. 14).
• Carbon Capture: The carbon oxide sequestration credit (Section 45Q), which incentivizes capturing and storing CO2, is also repealed (Sec. 12).
• Manufacturing: The advanced manufacturing production credit (Section 45X), which supports domestic manufacturing of clean energy components, is gone (Sec. 16).

Basically, if you’re a business building a new wind farm, developing hydrogen fuel, or trying to make your factory more energy efficient, the tax incentives that underpin your financial modeling are set to expire in 2026. This creates massive uncertainty for long-term project planning across the entire energy sector.

The End of Direct Pay

One of the most significant changes for non-taxable entities (like municipalities, rural electric co-ops, and tax-exempt organizations) is the repeal of the elective payment and transferability rules (Sections 6417 and 6418) (Sec. 24). These sections allowed these groups to get a direct cash payment from the government in lieu of a tax credit they couldn't otherwise use. Eliminating this “direct pay” option removes a crucial mechanism that allowed public entities to finance clean energy projects without relying on complex, costly partnerships with private tax equity investors. Without direct pay, many community-level clean energy projects could become financially unviable. The bill also repeals the deduction for energy-efficient commercial buildings (Section 179D) (Sec. 22), further discouraging businesses from investing in efficiency upgrades. The only major incentive that sees a tweak rather than a full repeal is the credit for second-generation biofuel producers (Sec. 7), which is simplified rather than eliminated.