Energy Efficient Home Improvement Credit (2025-2026): What Qualifies, How Much You Can Save and How to Claim It
Written by
Andrew Lisa
Edited by
Nupur Gambhir, CFHC™
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Homeowners can claim up to $3,200 per year in federal tax credits for qualifying energy-efficient upgrades made during the program’s final eligibility period. In most cases, the credit covers 30% of project costs, including installation, helping offset the upfront expense of improvements that can also lower monthly utility bills. Eligible projects include upgrades such as heat pumps, insulation, exterior windows and doors, certain HVAC systems, and professional home energy audits.
Because the credit expired at the end of 2025, 2026 is the final tax-filing year in which homeowners can claim the benefit for qualifying improvements completed during the eligible timeframe.
What Is the Energy Efficient Home Improvement Credit?
The Energy Efficient Home Improvement Credit (EEHIC), also known as Section 25C, is a federal tax credit that can provide homeowners with up to $3,200 per year for qualifying energy-efficient home upgrades. It is separate from Section 25D — the Residential Clean Energy Credit (RCEC) — which applies to renewable energy systems such as solar panels.
Unlike tax deductions, which lower your taxable income, tax credits reduce your tax bill dollar for dollar, making them one of the most valuable tax incentives available for home improvements. The EEHIC is nonrefundable, meaning it can reduce your federal tax liability to $0 but does not generate a refund beyond the taxes you owe.
The credit was expanded and extended through 2032 under the Inflation Reduction Act of 2022, but subsequent legislation shortened the program’s timeline and scheduled the credit to end after 2025. As a result, 2026 is the final tax-filing year in which eligible homeowners can claim the credit for qualifying improvements completed before the program’s expiration.
Who Qualifies for the Energy Efficient Home Improvement Credit?
To qualify for the Energy Efficient Home Improvement Credit, the upgrades must be made to a primary residence located in the U.S., and the person claiming the credit must be the homeowner. The following checklist summarizes the main eligibility rules:
- The home must be your primary U.S. residence
- Vacation homes and second homes generally do not qualify
- The property must be an existing home — new construction is typically not eligible
- The credit is generally not available to renters, landlords, or non-resident property owners claiming improvements on properties they do not occupy as a primary residence
- Properties used entirely for business purposes are not eligible
- For mixed-use homes (part residential, part business), homeowners may usually claim the full credit for qualifying residential expenses, while any business-use portion must be calculated based on the percentage of non-business use
How Much Can You Save? Annual and Per-Item Credit Limits
The Energy Efficient Home Improvement Credit allows homeowners to claim up to $3,200 per tax year. Because the credit resets each year and does not carry forward, any unused portion is forfeited. This annual structure allows homeowners to spread projects across multiple years and potentially claim the maximum credit more than once by completing eligible upgrades in separate tax years.
Annual Maximum Credit
- Maximum total credit per year: Up to $3,200
- General efficiency upgrades cap: Up to $1,200 combined for qualifying building envelope improvements and certain equipment
- High-efficiency equipment cap: Up to $2,000 for qualifying heat pumps, heat pump water heaters, and biomass systems
- Carryforward: Not allowed — unused credits cannot be applied to future tax years
Credit Limits by Upgrade Type
Beginning Jan. 1, 2023, the credit generally equals 30% of the cost of qualified improvements and home energy audits, subject to the following per-item limits:
| Energy-Efficient Upgrade | Maximum Credit | Notes |
|---|---|---|
| Heat pumps, biomass boilers or stoves | Up to $2,000 | Must meet applicable efficiency standards (generally ≥75% thermal efficiency for biomass equipment) |
| Exterior doors | $250 per door (up to $500 total) | Must meet ENERGY STAR requirements |
| Windows or skylights | Up to $600 | Must meet ENERGY STAR requirements |
| Home energy audit | Up to $150 | Must be conducted by a qualified auditor and include a written report with cost-savings estimates |
| Insulation and air sealing materials | Up to $1,200 (combined annual envelope limit) | Must meet applicable efficiency standards in effect at installation |
| Central air conditioners, certain water heaters and boilers | Up to $600 | Includes central air systems and qualifying natural gas, oil, or propane water heaters and boilers |
These caps apply within the broader annual limits, meaning homeowners may be able to combine several smaller upgrades in the same year while staying within the overall $1,200 general-improvement cap or the $3,200 total annual maximum.
Eligible Home Improvements Under the Credit
Only certain energy-efficiency upgrades qualify for the Energy Efficient Home Improvement Credit, and each category must meet specific federal efficiency standards. Understanding which improvements are eligible — and which costs count — can help homeowners avoid common filing mistakes.
Windows, Doors and Skylights
Energy-efficient windows, exterior doors and skylights can qualify if they meet ENERGY STAR® requirements, which vary by regional climate zone (Northern, North-Central, South-Central and Southern). While these upgrades can deliver meaningful energy savings nationwide, only the cost of the products qualifies for the credit — installation labor for windows and doors is not eligible, a detail that often surprises homeowners.
HVAC Systems, Heat Pumps and Water Heaters
Eligible heating and cooling equipment must meet or exceed the Consortium for Energy Efficiency (CEE) highest efficiency tier standards, representing the top-performing products in each category. Traditional HVAC equipment such as qualifying air conditioners, boilers and water heaters generally falls under the $600-per-unit credit limit, while heat pumps and heat pump water heaters can qualify for credits up to $2,000, depending on the system installed.
Insulation and Air Sealing
Insulation upgrades and air-sealing improvements may qualify when materials meet International Energy Conservation Code (IECC) efficiency standards. As with windows and doors, only the cost of qualifying materials is eligible, not installation labor. Air sealing typically involves identifying and closing gaps that allow unwanted airflow and thermal loss, helping improve both comfort and energy efficiency.
Home Energy Audits
Professional home energy audits are also eligible for a limited credit when conducted by a qualified home energy auditor certified through a Department of Energy-recognized program. To claim the credit, homeowners must receive and keep a signed written report that includes the auditor’s name, employer identification number (EIN), certification program and an estimate of potential energy savings.
What Doesn’t Qualify for the Credit
Not every home improvement is eligible for the Energy Efficient Home Improvement Credit. In general, the credit applies only to qualifying upgrades made to an existing primary residence using certified energy-efficient products. The following situations are common reasons a claim may be denied:
- New construction projects: The credit applies to improvements made to existing homes, not newly built properties.
- Rental-only properties: Homes used exclusively as rental properties generally do not qualify.
- Cosmetic upgrades: Improvements that do not directly improve energy efficiency — such as aesthetic remodeling — are not eligible.
- Non-certified products: Equipment and materials that do not meet required ENERGY STAR®, CEE or other applicable efficiency standards will not qualify.
- Improvements completed outside the eligible tax year: Only upgrades installed during the qualifying timeframe can be claimed for that specific tax filing year.
How to Claim the Energy Efficient Home Improvement Credit (Step-by-Step)
You can claim the Energy Efficient Home Improvement Credit by completing IRS Form 5695, Part II (Part I applies to the Residential Clean Energy Credit). Follow these general steps when preparing your return:
- Open Form 5695 and navigate to Part II, Section A. Answer questions 17a through 17c, which confirm that the property and improvements meet eligibility requirements. If any answer is “No,” the credit cannot be claimed.
- Enter your property details. If all eligibility questions are answered “Yes,” list the address of the qualifying property on line 17d. Line 17e asks whether improvements were related to home construction — if so, only certain qualifying expenses may be eligible.
- Report qualified expenses. Use lines 18 through 20 to enter the costs of eligible improvements and calculate the portion of the credit allowed for those upgrades.
- Move to Part II, Section B. Answer questions 21a and 21b, which determine eligibility for residential energy property expenditures. If either answer is “No,” skip to line 26. If both are “Yes,” complete lines 22 through 25 to report additional qualifying equipment costs.
- Finish the credit calculation. Complete lines 27 through 32 to determine the final credit amount that will transfer to your tax return.
A Quick Filing Reminder
You typically do not need to submit receipts with your return, but you should keep all documentation — including invoices, manufacturer certifications and audit reports — in case the IRS requests verification.
Documentation Checklist: What to Keep for the IRS
To support your Energy Efficient Home Improvement Credit claim, keep records showing that both the products installed and the timing of the upgrades meet IRS requirements. Maintain the following documentation with your tax records:
- Itemized receipts and invoices showing the cost of qualifying products and, where applicable, installation
- Manufacturer certification statements confirming the product qualifies for the credit
- ENERGY STAR® or CEE efficiency documentation verifying the equipment meets required standards
- Home energy audit report, if claiming the audit credit, including the auditor’s certification details
- Installation and service dates showing the improvements were completed during the eligible tax year
You generally do not need to submit these documents with your tax return, but you should retain them in case the IRS requests verification.
Energy Tax Credits vs. Rebates: Understanding the Difference
Energy-efficiency incentives often come in two forms — tax credits and rebates — and knowing how they work together can help you estimate your true savings before starting a project. While both reduce the overall cost of upgrades, they apply at different points in the purchase process.
- Tax credits lower the amount of federal income tax you owe on a dollar-for-dollar basis when you file your return.
- Rebates reduce the purchase price upfront or provide cash back after installation, depending on the program.
In many cases, homeowners can combine (or “stack”) federal tax credits with state, local and utility rebates, further lowering the total project cost. Additionally, some states, utilities and manufacturers also offer additional incentives, such as cash-back promotions, low-interest loans or 0% financing programs
Real-World Examples: What Homeowners Might Actually Save
The following examples show how the Energy Efficient Home Improvement Credit works in practice and how annual and per-item caps can affect the final credit amount.
Example 1: Heat pump installation
A homeowner installs a qualified heat pump costing $9,000. Thirty percent of the cost equals $2,700, but because the credit for heat pumps is capped at $2,000, the homeowner claims the maximum $2,000 credit.
Example 2: Mixed-use property
Another homeowner installs the same $9,000 heat pump, but only 70% of the property is used for personal residential purposes, with the remaining 30% used for business. Because the credit applies only to the personal-use portion, the eligible cost is reduced accordingly, resulting in a $1,400 credit instead of $2,000.
Example 3: Energy-efficient window replacement
A homeowner replaces older windows with ENERGY STAR® windows costing $4,000. Although 30% of the cost equals $1,200, the program caps window credits at $600, so the homeowner receives a $600 credit.
Example 4: Combining insulation and an energy audit
A homeowner completes a $400 home energy audit and a $2,500 insulation upgrade in the same year. The audit generates a $120 credit (30% of $400), while the insulation project yields a $750 credit (30% of $2,500), resulting in a total credit of $870 for the year.
Understanding the Two Federal Energy Tax Credits: EEHIC vs. Clean Energy Credit
Homeowners often confuse the Energy Efficient Home Improvement Credit (Section 25C) with the Residential Clean Energy Credit (Section 25D), but the two incentives apply to different types of upgrades. Understanding the distinction can help you determine which projects qualify and how much you may be able to claim.
Energy Efficiency vs. Renewable Energy Systems
- Section 25C (EEHIC): Covers energy-efficiency upgrades that reduce energy use, such as insulation, high-efficiency windows and doors, qualifying HVAC equipment and heat pumps.
- Section 25D (RCEC): Applies to renewable energy systems that generate power, including solar panels, geothermal systems, small wind turbines and certain battery storage systems.
Heat Pumps vs. Solar Panels
Heat pumps use electricity to move heat more efficiently, reducing the amount of energy needed to heat or cool a home. Solar panels, by contrast, generate electricity from sunlight, helping offset or replace the electricity a household purchases from the grid. Both can qualify for tax incentives, but under different credit programs.
Annual Caps vs. No Dollar Limit
Both credits generally equal 30% of qualified project costs, but their limits differ:
- EEHIC (Section 25C): Subject to annual caps and per-item limits, with a maximum annual credit of up to $3,200.
- RCEC (Section 25D): No annual or lifetime dollar cap, allowing homeowners to claim the full percentage of eligible renewable energy installation costs.
Refundability
Both credits are nonrefundable, meaning they can reduce your tax liability to $0 but do not provide a refund beyond the taxes you owe.
Bottom Line: Is the Energy Efficient Home Improvement Credit Worth It?
For eligible homeowners, the Energy Efficient Home Improvement Credit can meaningfully reduce the cost of qualifying upgrades, especially when combined with local rebates and utility incentives. Because the program ended after 2025, filing your 2025 tax return in 2026 represents the final opportunity to claim the credit for eligible improvements completed before the expiration. Reviewing eligibility rules and organizing documentation before filing can help ensure you receive the full benefit available.
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- IRS. 2024. "Energy Efficient Home Improvement Credit."
