Efficiency upgrades to insulation, windows, doors, and air conditioners help homeowners save energy and reduce monthly bills. Millions of Americans across all 50 states have offset some of those costs at tax time through the federal 25C Energy Efficient Home Improvement Tax Credit. With both the 25C and 25D Residential Clean Energy Credit scheduled to expire Dec. 31, homeowners considering projects are encouraged to act quickly.
25C Energy Efficient Home Improvement
Upgrades to insulation, air sealing, windows, doors, heat pump HVAC or water heaters, and electrical panels, as well as home energy audits, are all examples of eligible improvement projects. Homeowners can claim up to 30% of the project cost. For equipment upgrades (for example, heat pumps and electric panels), both materials and labor qualify. For building envelope improvements, such as insulation, windows, and doors, only materials qualify.
25D Residential Clean Energy Credit
25D allows homeowners to claim 30% on the total cost of qualifying energy projects such as installing solar, solar water heating, small wind, geothermal, and battery storage. The credit is applied to the entire project cost including equipment, labor, permitting, and installation.
More detailed information on these tax credits can be found at cfra.org/rural-resources.
Lead times for hiring contractors and obtaining equipment, permits, and utility interconnections can stretch weeks to months, so starting now offers the best chance to meet the Dec. 31 deadline.
The tax credits can be claimed using IRS Form 5695 for the tax year in which the project is installed and placed in service. For 2025 installations, that is the 2025 return filed in 2026. Keep itemized invoices, product certifications, and permits for tax time.
Even though these federal tax credits are ending under the One Big Beautiful Bill Act, many utility companies will continue to offer rebates or incentives that can make upgrades more affordable. Those with interest should reach out to their utility provider directly for options.
