Energy Efficient Home Improvement Credit 25C

A tax credit that supports improving the energy efficiency of an existing home, such as home energy audits, doors, windows, insulation, and heating and cooling equipment.

The 25C tax credit is used to get money back on energy-efficient improvements in your home.

Qualified energy-efficient improvements include:

• Insulation or air sealing material or system.
• Exterior doors.
• Windows and skylights.
• Efficient central air conditioners.
• Efficient natural gas, propane, or oil water heaters.
• Efficient natural gas, propane, or oil furnaces and hot water boilers.
• Electric upgrades to panelboards, subpanel boards, branch circuits, or feeders.
• Home energy audits.
• Heat pump and heat pump water heaters.
• Electric or natural gas heat pumps.
• Electric or natural gas heat pump water heaters.
• Biomass stoves and biomass boilers.

The tax credit is 30% of qualified expenses, with specific limits determined by the project type. The maximum credit you can claim each year is $3,200 total, with $2,000 per year for qualified heat pumps, biomass stoves, or biomass boilers and $1,200 for all other energy-efficient home improvements.

The credit has no lifetime dollar limit. You can claim the maximum annual credit every year that you make eligible improvements until 2033.

This can be used with other federal incentives like the Home Efficiency Rebate and Home Electrification and Appliance Rebate, which will lower total project costs. If using rebates you must subtract their value from the project cost on your tax form. This will impact the value of the credit and the tax credit will be applied to your post-rebate cost.

• An owner-occupied household.
• A tenant who pays for HVAC or energy audit in their rental home.

This tax credit can only be realized as a deduction from annual taxes owed, meaning you must have tax liability greater than the value of the credit in order to receive the benefit.

The credit may not be claimed by homeowners on rental units, but they may be eligible for other incentives.

If your home is partly used for business, the credit follows a different rate, which you can on irs.gov.

The 25C credit is available for purchases on or after January 1, 2023, through December 31, 2032.

You may claim the credit when you file your tax return by submitting Form 5695, Residential Energy Credits. You must claim the credit for the tax year when the project is installed, not purchased. The value of the credit will be reduced from the amount of taxes you owe. The credit is not refundable, so the credit amount you receive cannot exceed the amount you owe in tax.

When calculating your credit, you need to subtract rebates from your qualified property expenses because they are considered a purchase price adjustment.

Visit the federal website irs.gov for more details on what qualifies and how to use the credit.