What’s new with IRA tax credits in 2025?

It is important to understand the changes in structure of Inflation Reduction Act (IRA) tax credits in 2025 to maximize incentives and ensure compliance. Until recently, IRA tax credits under the section 48 investment tax credit (ITC) and section 45 production tax credit (PTC) have been the prevailing credit regime, as they apply to eligible projects that began construction by Dec. 31, 2024. Now that we are several months into 2025, section 48 and 45 tax credits have primarily been phased out. New tax credit structures under sections 48E and 45Y now govern projects beginning construction in 2025 and beyond. Understanding these changes is crucial for property owners, developers and investors looking to maximize available incentives while ensuring compliance with evolving regulations. 

What are the new final rules? 

The Treasury Department and IRS determined that quickly implementing final regulations was necessary to provide clarity for taxpayers placing energy property into service before the provisions expire and planning construction before Jan. 1, 2025. The final rules were published in the Federal Register on Dec. 12, 2024, and provide further clarification on several critical topics. Learn more about the final regulations for section 45Y and 48E tax credits.  

Section 48 vs. section 48E 

For projects placed in service on or after Jan. 1, 2025, tax credits are available under section 48E and section 45Y, instead of section 48 and section 45, respectively. However, taxpayers cannot claim both credits for the same facility. Section 48E and section 45Y tax credits will remain the prevailing regime until the credits begin phase-outs starting during the latter of (a) 2032 or (b) when US greenhouse gas (GHG) emissions from electricity are 25% of 2022 emissions or lower.  

For clients investing in clean energy projects, understanding the evolving credit structure is essential to mitigating financial risk and ensuring compliance. While section 48 covered a broad range of eligible technologies, including biogas and combined heat and power (CHP), section 48E is specifically focused on clean electricity generation. This means that certain technologies previously eligible for ITC under section 48 no longer qualify under the new framework. There are still ways certain biogas properties can be eligible for ITC under 48E. However, property owners planning to invest in energy systems must carefully evaluate their projects against the updated eligibility criteria. Review the changes to