Key highlights:
- Section 199A made permanent – 20% small business deduction secured indefinitely with higher income thresholds and a guaranteed $400 minimum
- Energy efficiency incentives eliminated – Senate version sunsets 179D, 25C, 45L, and 25D tax credits that have driven customer demand for decades
- Time running out – If the House makes changes to the Senate bill, there could still be an opportunity to restore contractor priorities. Take action today!
The Senate passed its version of President Trump’s one “big, beautiful bill” on July 1, in a narrow 51-50 vote, with Vice President JD Vance casting the deciding ballot. House leaders hope to pass the Senate bill without changes in time for President Trump’s July 4 deadline, but various factions are calling for changes that could open the door to restoring contractor priorities.
For HVACR contractors, the bill delivers a historic victory alongside challenging setbacks. The legislation makes the Section 199A small business deduction and 100% bonus depreciation permanent, securing critical tax benefits for thousands of contractors. It also eliminates virtually every energy efficiency tax incentive that has driven customer demand for high-efficiency systems over the past two decades.
There’s still time to act and urge your representatives to fight alongside ACCA to increase 199A and restore energy efficiency tax incentives.
Here’s everything you need to know about the bill:
The big win: Section 199A becomes permanent with enhanced benefits
After months of uncertainty, the Senate bill makes the Section 199A qualified business income deduction permanent at the current 20% rate (the House originally proposed 23%). This means HVACR contractors operating as S-corporations, partnerships, and sole proprietorships can continue deducting up to 20% of their qualified business income indefinitely.
The bill builds on this victory with other meaningful improvements:
- Higher income thresholds: The phase-out now begins at $75,000 for individuals (up from $50,000) and $150,000 for married couples filing jointly (up from $100,000). This means more contractors can claim the full deduction before hitting income limits.
- Guaranteed minimum deduction: Any contractor with at least $1,000 in qualified business income gets a minimum $400 deduction, providing certainty for smaller operations.
While ACCA signed a letter urging the restoration of the 23% rate passed by the House, these changes are a massive victory for HVACR businesses. Without congressional action, 199A would have expired at the end of 2025, potentially costing contractors thousands in additional taxes annually.
The devastating loss: Energy efficiency incentives eliminated
Both versions of the bill eliminate the residential energy efficiency tax credits, but the Senate version adds insult to injury by also eliminating the Section 179D deduction for energy efficient commercial buildings. ACCA succeeded in making that provision permanent in 2020 and we’re hopeful the House might restore it if they amend the bill.
Four major tax incentives face termination:
- Section 25C (Energy Efficient Home Improvement Credit) expires December 31, 2025
- Section 179D (Energy Efficient Commercial Buildings Deduction) ends for projects beginning construction after June 30, 2026
- Section 45L (New Energy Efficient Home Credit) terminates June 30, 2026
- Section 25D (Residential Clean Energy Credit) sunsets December 31, 2025
This would be the biggest federal pullback from energy efficiency in over a decade. Contractors who built their businesses around helping customers access these incentives now face uncertainty about whether customers will still invest in premium equipment without federal money helping cover the costs.
What happens next
President Trump set a July 4 goal to enact this bill, but the path forward is far from certain. Some House Republicans have already expressed disappointment with the Senate’s changes to the bill, which could put the package at risk.
Here’s what contractors need to watch:
This week: The House will decide whether to take up the Senate bill or negotiate changes. Your calls to Representatives matter right now ─ take action.
If the House passes it unchanged: The bill goes to President Trump’s desk, where he’s expected to sign the changes into law.
If the House demands changes: The bill goes back to the Senate for another vote.
If nothing passes by July 4: While President Trump has set a self-imposed deadline of July 4, he has indicated that it’s “not the end-all” ─ the deadline could be extended.
This story is still developing. We’ll provide a complete rundown of the bill once it’s officially signed into law. In the meantime, ACCA is pushing hard for the House to increase Section 199A and restore energy efficiency incentives.
The post Wins and losses in Senate’s narrowly passed bill: 199A saved, energy efficiency incentives gutted appeared first on ACCA HVAC Blog.