New Bill Links Home Improvement Tax Credit to American Hardwood, Cuts Carbon Capture Subsidy

This bill, officially called the Solid American Hardwood Tax Credit Act, is a two-part deal that touches on both your home renovation budget and major industrial climate projects. First, it changes the popular energy efficient home improvement tax credit (Section 25C) to include a new category of spending: “natural carbon sink expenditures.” Second, it pulls the plug on the enhanced tax credits for new carbon capture facilities.

Your Next Kitchen Remodel Might Be a Tax Write-Off

The big news for homeowners is the new tax credit for specific hardwood materials used in your primary residence. If you’re putting in new flooring, paneling, millwork, or even cabinet doors and facings, you might qualify. The catch? These materials must be made from deciduous trees that were both grown and processed right here in the United States (Sec. 2). This is a clear move to boost domestic manufacturing and forestry. To get the credit, you have to be the first person to use the item, and it must be installed in your main home. Think of it as a financial nudge toward American-made wood products the next time you decide to upgrade your living room. The bill also extends the eligibility window for these energy efficiency credits from 2032 to 2035, giving everyone a longer runway to claim them.

The Fine Print on the Lumber

While supporting American wood is great, this provision comes with some practical questions. Homeowners and contractors will need to be meticulous about documentation. Proving that the wood for your new kitchen cabinets was sourced and processed entirely within the U.S. might involve tracking supply chains more closely than usual. If you’re a busy homeowner, you’ll need to make sure your supplier can provide the necessary proof, or you could lose the credit. For the American hardwood industry, this is a major incentive, potentially driving up demand—and perhaps the price—for qualifying domestic wood products.

The Carbon Capture Handbrake

On the industrial side, the bill makes an abrupt change to the tax credit for carbon oxide sequestration (Sec. 3). Currently, companies capturing and storing CO2 receive a tax credit (Section 45Q). This bill terminates the temporary, increased credit rate that was put in place to incentivize these projects. If a company starts construction on a new carbon capture facility after this bill becomes law, they will lose access to that enhanced, higher credit rate. For developers planning large-scale carbon capture projects, this is a significant financial hit. It removes a key subsidy designed to make these expensive, often risky, infrastructure projects financially viable. This move could slow down the development of new carbon capture technology and facilities across the country, as the economics of those projects suddenly become much less favorable.