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The 25C tax credit, formally known as the Energy Efficient Home Improvement Credit, is a U.S. federal tax incentive aimed at encouraging homeowners to make energyefficient upgrades to their primary residences. It was expanded and enhanced under the Inflation Reduction Act of 2022, effective for tax years 2023 through 2032.
Eligibility:
- Applies to improvements made to a taxpayer’s primary residence (not rental or second homes).
- Includes energy-efficient upgrades such as insulation, windows, doors, HVAC systems, and select tankless water heaters
Credit Amount:
- You can claim 30% of the costs for qualifying energy-efficient improvements.
- Certain projects, like heat pumps and tankless water heaters, have a separate annual limit of $2,000.
Qualifying Upgrades:
- Heating, ventilation, and air conditioning (HVAC): Includes energyefficient heat pumps, central air conditioners, and water heaters.
- Insulation and air sealing: Materials that reduce heat loss or gain.
CarryoverBenefitsandDocumentation
Unlike previous versions of the credit, the annual cap resets each year, allowing homeowners to spread out their
improvements over multiple years and claim credits each time. Homeowners need to retain receipts and
manufacturer certifications that confirm the product or service meets eligibility standards.
