$600 Tax Credit: Eligible Items, Annual Caps, and Deadline

The $600 tax credit for home improvements is a per-item cap inside the federal Energy Efficient Home Improvement Credit under Section 25C. It gives you 30% of what you spend on certain energy-efficient upgrades to your home, with $600 as the maximum credit for several specific items: central air conditioners, gas or oil furnaces and boilers, non-heat-pump water heaters, exterior windows and skylights (combined), and qualifying electrical panel upgrades. The credit is available for property installed through December 31, 2025, after which the One Big Beautiful Bill Act ends it.¹²

Which Items Qualify for the $600 Credit

Five categories of improvement carry a $600 cap. Each has its own efficiency requirement, and the credit equals 30% of the qualifying cost up to that ceiling.

Central Air Conditioners

A central AC system qualifies for up to $600 if it meets or exceeds the highest efficiency tier set by the Consortium for Energy Efficiency (CEE) at the start of the year it is installed.¹ In practice, split systems need a SEER2 of at least 17 and an EER2 of 12, and packaged systems need a SEER2 of at least 16 and an EER2 of 11.5.³ Both equipment and installation labor count. Window units do not qualify.

Gas, Propane, and Oil Furnaces and Boilers

Each qualifying furnace or hot water boiler carries a $600 cap. Gas furnaces must be ENERGY STAR certified with an Annual Fuel Utilization Efficiency (AFUE) of at least 97%.⁴ Oil-fired furnaces and boilers placed in service through December 31, 2026, must meet 2021 ENERGY STAR criteria and be rated for use with fuel blends of at least 20% eligible biofuel.⁵ Installation labor is included.

Water Heaters (Non-Heat-Pump)

Natural gas, propane, and oil water heaters qualify for up to $600 each if they meet the CEE highest efficiency tier. Heat pump water heaters do not use the $600 cap; they belong to a separate $2,000 category discussed below.¹

Exterior Windows and Skylights

Windows and skylights share a single $600 limit for the year. The cap is not per window: it covers everything you install in the tax year, combined. Products must meet ENERGY STAR “Most Efficient” certification for your climate zone, which you can verify through the NFRC Certified Product Directory.⁶ Only the product cost counts; installation labor does not.¹

Electrical Panel Upgrades

Panelboards, sub-panelboards, branch circuits, and feeders qualify for up to $600 if the panel has a load capacity of at least 200 amps, is installed consistent with the National Electric Code, and is done together with another qualifying energy improvement or energy property installation.⁷ A standalone upgrade with no other qualifying improvement does not count.

How the $600 Caps Fit Into the $1,200 Annual Limit

All of these $600 items sit inside a larger $1,200 annual ceiling that also covers doors, insulation, air sealing, and home energy audits. Even if 30% of your actual spending would produce a higher number, the $1,200 total is the most you can claim from this group in one tax year.¹

The other per-item limits inside the $1,200 cap are worth knowing so you can plan around them:

Exterior doors: $250 per door, $500 total for all doors.
Home energy audit: $150.
Insulation and air sealing: no per-item cap, but subject to the $1,200 ceiling; materials must meet International Energy Conservation Code standards in effect two years before installation.

The annual limits reset each January 1, and there is no lifetime cap. If you make eligible improvements in more than one year, you can claim the maximum each time.

The Separate $2,000 Bucket for Heat Pumps and Biomass

Heat pumps, heat pump water heaters, and biomass stoves and boilers have their own $2,000 annual credit that stacks on top of the $1,200. A homeowner who installs a qualifying heat pump and also replaces windows and doors in the same year could claim up to $3,200 total.⁸

The credit is nonrefundable, and any unused portion cannot be carried forward. If your federal tax bill is smaller than the credit you’d otherwise claim, ENERGY STAR suggests spreading improvements over multiple years to use the full benefit.⁸

Who Can Claim It

The home must be an existing residence in the United States. New construction does not qualify. For most items in the $1,200 group (windows, doors, insulation), the home must be your principal residence and you must own it. For HVAC equipment, heat pumps, and biomass units, the credit can apply to any residence you use, including one you rent. Landlords who don’t live in the property cannot claim it.⁹ Renters who pay for qualifying improvements themselves may also be able to claim.¹⁰

Products must be new. And starting with 2025 installations, each item of qualifying property (except insulation and air sealing materials) must come from a manufacturer registered with the IRS. You’ll need to report the manufacturer’s four-character Qualified Manufacturer Identification Number (QMID) on your return. Manufacturers publish their codes; installers can also provide them. Daikin’s QMID, for instance, is I7Q6, and Lennox’s is L7S0.¹¹

How to Claim the Credit

File IRS Form 5695, Residential Energy Credits, Part II, with your federal income tax return for the year the improvement was installed. The form asks for the type and cost of each qualifying improvement, the applicable credit limits, and (for 2025 installations) the QMID for each product.¹¹

Before you calculate the 30%, subtract certain payments you received toward the purchase or installation. Public utility subsidies come off the top. Rebates from manufacturers, distributors, or installers that are tied to the product’s cost also reduce your qualifying expense. Rebates paid through the Department of Energy’s Home Energy Rebate programs (HOMES and HEEHRA) are treated as purchase price adjustments and reduce the base for the credit as well.¹² A $400 product with a $100 DOE rebate becomes $300 for credit purposes, so the credit is 30% of $300. The rebate itself is not taxable income.¹³

The December 31, 2025 Cutoff

The One Big Beautiful Bill Act (Public Law 119-21), signed on July 4, 2025, ends the Section 25C credit for any property placed in service after December 31, 2025. The original Inflation Reduction Act timeline had extended it through 2032; that timeline no longer applies.² If you’re planning any of the $600-cap improvements, installation has to be complete by that date to claim the credit.

What This Credit Does Not Cover

Solar panels, solar water heaters, small wind turbines, geothermal heat pumps, fuel cells, and battery storage are not part of the $600 or $1,200 structure. They fall under a separate credit, the Residential Clean Energy Credit under Section 25D, also worth 30%, but without an annual dollar cap for most items and with carryforward of unused amounts to future years.¹⁴ You can claim both credits in the same year if you install both kinds of improvements; they appear on different parts of Form 5695.¹⁰

1
Internal Revenue Service. Energy Efficient Home Improvement Credit
2
Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, and Others Under Public Law 119-21
3
Consumer Reports. Get Tax Credits for Home Energy and Efficiency Upgrades
4
ENERGY STAR. Furnaces – Natural Gas, Oil
5
Legal Information Institute. 26 U.S. Code § 25C
6
ENERGY STAR. Windows and Skylights
7
ENERGY STAR. Electric Panel Upgrade
8
ENERGY STAR. Federal Tax Credits
9
Internal Revenue Service. Publication 5967 – Energy Efficient Home Improvement Credit
10
Internal Revenue Service. Home Energy Tax Credits
11
Internal Revenue Service. Instructions for Form 5695
12
Internal Revenue Service. IRS Announcement 2024-19
13
U.S. Department of the Treasury. Coordinating DOE Home Energy Rebates With Energy Efficient Home Improvement Tax Credits
14
Legal Information Institute. 26 U.S. Code § 25D