The Energy Efficient Home Improvement Credit (Section 25C) was worth 30% of qualified upgrades up to $3,200 a year — but it ended for work done after December 31, 2025. Here is how it worked, who can still claim it on a prior return, and what replaced it for 2026 projects.
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The Energy Efficient Home Improvement Credit — Section 25C of the tax code — was a federal tax credit worth 30% of what you spent on qualified upgrades like insulation, windows, doors, heat pumps, and efficient HVAC, capped at $3 (learn more about how to plan a home improvement project: the complete homeowner's guide) (learn more about the 7 best flooring options for your home in 2026: a room-by-room guide) (learn more about best basement waterproofing companies in 2026: top 8 compared) (learn more about above ground pool installation cost 2026: 5 types ranked by price),200 per year. It no longer applies to work done in 2026 (learn more about best kitchen cabinet refacing companies of 2026 (ranked by cost, coverage, and warranty)). The One Big Beautiful Bill Act, signed July 4, 2025, terminated the credit for property placed in service after December 31, 2025. There was no phase-down and no reduced-rate transition — the credit simply stopped.
If you installed qualifying upgrades in 2025 or earlier (learn more about the contractor vetting checklist: 9 red flags that separate pros from sketchy operators), you can still claim the credit on that year's return. If you are planning work now, the money has moved: federal HOMES and HEAR rebate programs, plus state and utility rebates, are where the savings live in 2026.
Here is how the credit worked, who can still use it, and what to look at instead.
Section 25C was a non-refundable tax credit. It reduced what you owed the IRS, dollar for dollar, but it would not generate a refund beyond your tax liability, and unused amounts did not carry forward to the next year. You claimed it on IRS Form 5695 with your federal return.
The structure had two layers: an overall annual cap, and per-item caps underneath it.
| Upgrade | Credit rate | Annual cap |
|---|---|---|
| Heat pumps, heat pump water heaters, biomass stoves and boilers | 30% of cost | $2,000 |
| Central A/C, efficient furnaces and boilers, electrical panel upgrades | 30% of cost | $600 per item |
| Exterior windows and skylights | 30% of cost | $600 |
| Exterior doors | 30% of cost | $250 per door, $500 total |
| Insulation and air sealing materials | 30% of cost | $1,200 (within the general cap) |
| Home energy audit | 30% of cost | $150 |
| Combined maximum per year | — | $3,200 |
The $3,200 was really $2,000 (the heat pump bucket) plus $1,200 (everything else). It reset every year, which is why homeowners often staged projects across two tax years — insulation and an audit in one year, a heat pump the next. If you are still planning a home improvement project around that old two-year rhythm, the reason for it is gone.
Two details tripped people up regularly, and they still matter for anyone filing on a prior year:
The credit is closed to new work, but not closed entirely.
You installed qualifying upgrades in 2025. Claim them on your 2025 federal return using Form 5695. "Placed in service" means the date installation was completed — not the date you paid the deposit, signed the contract, or took delivery of the equipment. A furnace bought in December 2025 but installed in January 2026 does not qualify.
You installed qualifying upgrades in 2022–2024 and never claimed the credit. You can generally amend a return within three years of the original filing date. It is worth a conversation with whoever prepares your taxes, because the older years followed different rules — 2022 used the earlier 10% lifetime-cap version, and the 30% structure above only began in 2023.
A quick word on records. If you are claiming for 2025, pull together the invoice showing the completion date, the manufacturer's certification statement, and the product's efficiency rating before you file. Contractors get harder to reach the further you are from the job.
The credit went away. The rebates did not. Two federal rebate programs funded by the Inflation Reduction Act were appropriated separately, survived the 2025 tax changes, and are rolling out state by state.
| Program | What it is | Maximum | Income-qualified? |
|---|---|---|---|
| HEAR (High-Efficiency Electric Home Rebate) | Point-of-sale rebate on electric appliances — heat pumps, heat pump water heaters, electric stoves, wiring, insulation | Up to $14,000 | Yes — households at or below 150% of area median income |
| HOMES | Rebate based on measured or modeled whole-home energy savings from a retrofit | Up to $8,000 | No — open to all homeowners, larger amounts at lower incomes |
| State and utility rebates | Local programs, often stackable on top of the federal ones | Varies widely | Varies |
Three things are worth knowing before you count on this money:
One credit did survive in a limited form: the Residential Clean Energy Credit (25D) for solar, battery storage, and geothermal. That one also has an end date under the same 2025 law, so if rooftop solar is on your list, confirm the current deadline with a tax professional before you sign.
If you were counting on $3,200 back at tax time to make a project work, the math has changed, and it is better to know that now than in April. The replacement path is usually a smaller headline number but faster money — and for a lower-income household, HEAR can be considerably more generous than 25C ever was.
The sequence that makes sense for most homeowners in 2026:
Sealing and insulating is still the highest-return work in most homes, credit or no credit. Our winterizing checklist ranks those jobs by what it costs you to skip them.
This guide reflects the Section 25C rules as enacted under the Inflation Reduction Act and their termination under the One Big Beautiful Bill Act (signed July 4, 2025), along with IRS guidance on Form 5695 and Department of Energy program information for the HOMES and HEAR rebate programs. Rebate availability and amounts are set by individual states and change as programs launch, so state figures should be confirmed against your own state energy office before you commit to a project.
Can I still get the Energy Efficient Home Improvement Credit in 2026?
No. The credit terminated for property placed in service after December 31, 2025. Work completed in 2026 does not qualify.
I bought a heat pump in 2025 but it was installed in 2026. Does it count?
No. The credit turns on the date the equipment was placed in service, meaning installation was completed — not the purchase date.
How much was the credit worth?
30% of qualified costs, capped at $3,200 per year: up to $2,000 for heat pumps, heat pump water heaters, and biomass stoves, plus up to $1,200 for insulation, windows, doors, HVAC, panel upgrades, and audits.
What form do I use to claim it for 2025?
IRS Form 5695, Residential Energy Credits, filed with your federal return.
Can I amend an old return to claim a credit I missed?
Generally yes, within three years of the original filing date. The rules differed before 2023, so check with a tax professional.
Was the credit refundable?
No. It reduced tax owed but could not produce a refund larger than your liability, and unused credit did not carry forward.
Did labor costs qualify?
For heat pumps, HVAC equipment, water heaters, and electrical panels, yes. For insulation, windows, and doors, only materials qualified.
What can I use instead in 2026?
The federal HOMES and HEAR rebate programs, administered by your state, plus state and utility rebates. HEAR is income-qualified and worth up to $14,000; HOMES is open to all homeowners and worth up to $8,000.
Do rebates work like the tax credit did?
No, and that is mostly good news. Rebates come off the project cost rather than arriving months later at tax time.
Does the solar credit still exist?
The Residential Clean Energy Credit (25D) for solar, battery storage, and geothermal survived 25C but has its own end date under the 2025 law. Confirm the current deadline before signing a solar contract.
Last updated: September 2026. We review this guide whenever federal tax or rebate rules change, and at minimum every six months.
This article is educational information about federal tax and rebate programs, not tax advice. Tax rules depend on your individual situation, and rebate programs vary by state and change as they roll out. Talk with a qualified tax professional about your own return, and confirm rebate availability with your state energy office before starting a project.
About HomeSimple — HomeSimple helps homeowners make clear decisions about repairs, upgrades, and the contractors who do the work. Our editorial team reads the primary rules and program documents rather than repeating what other sites say, and we update guides when the law changes rather than leaving last year's numbers in place.
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