An energy-efficient home results in many benefits for homeowners. While beneficial to the local environment, it can also help keep home running costs down. On top of that, another financial benefit can be tax credits for any upgrades you make that contribute to your home’s energy efficiency.
In this article, we explain simply what a tax credit is, how you can qualify for one and subsequently apply, and a breakdown of the different home upgrades and corresponding tax credits. So if you are looking to make your home a greener place to live and save money at the same time, read on to find out how.
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Key Takeaways:
If you undertook home improvement projects in 2024 that meet specific requirements, you can recoup 30% of the cost with the Energy-Efficient Home Improvement Credits.
If you install clean energy features such as solar panels or other eco-friendly products, you can recoup 30% of the expenses with Residential Clean Energy Credit.
The tax filing deadline is April 15.
What Are Tax Credits?
A tax credit is money that a taxpayer can deduct directly from the taxes that they owe. It’s important to note that they are different from tax deductions, which reduce the taxable income of an individual. For example, if you owe $1,000 in taxes, but you installed energy-efficient windows in your home, you can reduce this tax bill. If the total cost for the window installation was $2,000, you could be eligible for the 30% tax credit which would amount to $600. Therefore, your tax credit would mean your tax bill would now drop from $1,000 to $400.
Tax credits let federal and state governments promote certain behaviors such as promoting helping the environment. Hence tax credits for energy-efficiency home upgrades.
We are not providing tax advice. For guidance on your tax situation, you should get in contact with a tax professional.
Energy-Efficient Home Improvement Credits 2025
Below is a further breakdown of what is needed to qualify for each product and improvement tax credit. Starting in 2025, no credit will be allowed for any qualifying property placed in service unless it was produced by a qualified manufacturer, and the taxpayer reports the product identification number (PIN) for the item on their tax return.
Heat pumps and biomass stoves and boilers:
To qualify for up to $2,000 a year, the stove or boiler must have an efficiency rating of at least 75%. The improvements that qualify include new electric or natural gas heat pumps, water heaters, and biomass stoves and boilers.
Insulation and air sealing materials or systems:
These improvements have to meet the International Energy Conservation Code (IECC) standards that were in effect at the start of the year, two years before installation. For example, if you installed insulation in 2025, it must meet the IECC standards set as of January 1st, 2023. Insulation and air sealing materials or systems are the only qualifying property types that do not have to meet the PIN and qualified manufacturer requirements.
Exterior windows, skylights and doors:
For windows and skylights the maximum is $600, for exterior doors it’s $500 (up to $250 each). To qualify they need to meet applicable Energy Star requirements.
Central air conditioners, water heaters, furnaces, and hot water boilers:
These items need to meet the Consortium for Energy Efficiency’s (CEE) highest efficiency tier, not including any advanced tier, that was in effect at the start of the year when the product was installed.
Electric panel or circuit upgrades for new electric equipment:
Anything installed must meet the National Electric Code (NEC) and have a capacity of 200 amps or more.
Home energy audit:
To qualify for a tax credit on a home energy audit you must have a written report and inspection that identifies significant and cost-effective energy efficiency improvements are needed. This inspection must be conducted by a qualified home energy auditor certified by a Department of Energy-approved program or supervised by a certified auditor.
Home electric vehicle charger requirements:
The Alternative Fuel Vehicle Refueling Property Tax Credit is only available for those residents who live in non-urban or low-income communities. Your home must also be your primary residence.
Other Qualification Requirements
For the tax year 2024 through 2032, you can get a tax credit of up to 30% for a total of your energy-efficient home improvements made each year. There is no lifetime limit; therefore, the maximum tax credit you apply for is not capped overall.
To qualify for the energy efficiency home improvement credit, your home must meet the following requirements:
It must be located in the U.S.
The home improvement projects can only be carried out on an existing home. A new home does not qualify.
In most cases, it must be your primary residence.
If you also use your home for business purposes, here's how you can get credit for eligible clean energy expenses:
If your business use is up to 20% you can receive full credit.
If your business use is more than 20% the credit is based on the share of expenses apportionable to nonbusiness use.
If your property is used solely for business, you cannot claim credit.
Renewable Energy Home Improvement Credits
The Residential Clean Energy Credit (also known as the federal solar tax credit) is a way to incentivize homeowners to install clean energy products such as solar panels or other eco-friendly devices in their homes. This credit can cover installation expenses and could slash your federal income tax bill by a significant amount, potentially saving you thousands of dollars. In 2025, Residential Clean Energy Credit is equivalent to 30% of the expenses for the following:
Solar panels:
If you install a solar photovoltaic energy system (solar panels) they must provide electricity for the home and meet fire and electrical code requirements in order to qualify for this credit. However, it does not need to be your primary residence. Both existing properties and new homes qualify. Rentals do not qualify for the federal solar tax credit.
Solar water heaters:
To qualify for a tax credit for a solar water heater the system must power the residence and comply with your state’s government-endorsed entity requirements for solar rating or that of the Solar Rating and Certification Corporation (SRCC). Expenses for swimming pools or hot tubs are not included in this credit. Installation expenses for the water heater are included and similarly to solar panels, it does not need to be your main residence.
Fuel cells:
Fuel cells are limited to $500 for each one-half kilowatt of property capacity. To qualify for credit they need to have a capacity of at least 0.5 kW and an electricity-only generation efficiency greater than 30%. Unlike solar panels and water heaters, your home must be your primary residence. This includes a house, condo, mobile home, houseboat, manufactured home, and cooperative apartment. Installation costs are included in the tax credit.
Battery storage:
Suppose you have installed battery storage in your primary or secondary residence. In that case, whether it’s a new construction or an existing home, you can qualify for a tax credit so long as the technology has a capacity of 3 kWh or greater.
Geothermal heat pumps:
Geothermal heat pumps qualify for a tax credit as long as they meet Energy Star requirements in effect at the time of purchase in your primary or secondary residence, be it a new or existing home.
Small wind turbine:
The kinetic energy from a small wind turbine on your property can be tax credited along with the installation costs. Both new and existing homes qualify and it does not need to be your primary residence. Small turbines range in size from 20 Watts to 100 kW.
How to Apply for Federal Tax Credits for Energy-Efficient Upgrades
Once you’ve figured out if you qualify for an energy-efficient or renewable energy home improvement tax credit, you need to know how to go about applying for it. Firstly, make sure you have all the records of the expenses you have paid for your home upgrades. This includes receipts, invoices, and contractor information. You can only apply for the credit during the year in which you installed the new system, not the year in which you purchased it.
Complete form 5695 to calculate and take your credits and submit it along with your income tax return form 1040.
FAQ
Yes, you may qualify for a tax credit on certain energy-efficient home improvement projects and recoup up to 30% of the cost. These projects must meet specific requirements set by the IRS, including Energy Star standards or other recognized energy-efficiency guidelines.
To qualify for a tax credit, windows must meet the applicable Energy Star requirements. The credit for energy-efficient windows typically covers 30% of the cost, but there is a $600 annual limit for all windows and skylights installed each year.
Several energy-efficient appliances are eligible for tax credits including biomass stoves and boilers, heat pumps, water heaters, natural gas boilers, furnaces, and central air conditioners. These appliances must meet energy efficiency standards to qualify for the tax credit.