H.R. 1, officially known as the “One Big Beautiful Bill Act,” was signed into law by President Donald Trump on July 4 following final passage in the U.S. House of Representatives and a tie-breaking vote in the Senate. The legislation brings significant changes to federal clean energy tax credits, including major implications for the geothermal and solar tax credits.
One of the most immediate provisions is the elimination of the Residential Clean Energy Credit (25D) after December 31, 2025. This federal tax credit currently provides a 30 percent incentive for homeowners installing geothermal heat pumps and other renewable technologies, such as solar. Homeowners now have only months to take advantage of this credit before it disappears.
For contractors, drillers, and system providers who specialize in residential geothermal projects, this could lead to a sharp drop in demand starting in 2026 unless further legislative action reverses this change. Contractors should encourage their customers to look for state and utility incentives that can help defray costs.
The bill maintains commercial geothermal tax credits (Section 48 Investment Tax Credit) through 2034, offering some relief and planning certainty for large-scale projects. However, the availability of the full 100 percent credit applies only to projects that begin construction by the end of 2025. The credit amount gradually declines in the following years and becomes fully unavailable in 2035.
Commercial geothermal developers now have a narrow but important window to take advantage of full federal incentives. Groundwater professionals working on larger-scale projects should encourage clients to act quickly to secure these benefits.
NGWA will continue tracking the bill's impact on the industry and will be working with its members and lawmakers to find new solutions to incentivize geothermal and solar-powered systems to their customers.
The Association has always played a significant part in geothermal tax credits. NGWA was instrumental in the tax credit’s creation in 2008 and its reinstatement in 2018. When the tax credit was set to expire in 2023, its extension was a focal part of NGWA’s legislative advocacy efforts. Extension for both the residential and commercial tax credits were finally included in the Inflation Reduction Act of 2022.
Click here to read the bill.