How to Fill Out IRS Form 5695: Parts I and II, Caps, and Rebates

To fill out IRS Form 5695 for the 2025 tax year, work through Part I for the Residential Clean Energy Credit and Part II for the Energy Efficient Home Improvement Credit, enter your qualifying costs on the lines for each property type, apply the 30% credit rate against the applicable annual limits, list the required manufacturer identification numbers for Part II items, and transfer the final credit amounts to Schedule 3 of your Form 1040. Both credits were terminated for property installed after December 31, 2025, under the One Big Beautiful Bill Act signed on July 4, 2025, so the return you file in 2026 is the last chance to claim them for most taxpayers.¹

One carryover rule matters going forward. If your 2025 Part I credit exceeds your tax liability, the unused portion carries into 2026 and later years. Part II has no carryforward, so anything you cannot use in 2025 is gone.²

Gather Your Documents First

Open the form only after you have the paperwork lined up. You need:

Itemized receipts showing materials separately from labor, with the installation completion date, not just the purchase date.²
Manufacturer certification statements confirming each product meets the applicable efficiency standard. These are usually on the manufacturer’s website or in the product packaging.³
Qualified Manufacturer Identification Numbers (QMIDs) for every Part II item placed in service in 2025. The QMID is a four-character alphanumeric code that goes directly on Form 5695. Without it, the credit is disallowed for that item.²
Last year’s Form 5695 if you had an unused Residential Clean Energy Credit carrying forward.
The complete address of the home where each improvement was installed. The home must be in the United States and used as your residence.²

The QMID is the piece most people miss. It first applied to property placed in service starting January 1, 2025. If the manufacturer’s paperwork does not include one, contact them before you file.

Confirm the Home and the Taxpayer Qualify

The two parts have different residency rules, and getting this wrong means claiming a credit you were never entitled to.

For Part I, solar electric, solar water heating, small wind, geothermal, and battery storage all qualify at any home you use as a residence in the United States, including a second home. Fuel cell property is different: it must be at your principal residence.⁴ Landlords who do not live in the property cannot claim the credit.

Part II residency depends on what you installed:⁵

Windows, skylights, exterior doors, and insulation require that you own the home and use it as your principal residence.
Heat pumps, central air conditioners, water heaters, furnaces, boilers, and electrical panel upgrades only require the home to be a residence you use. Renters and second-home owners can qualify.
Home energy audits must be for your principal residence, but renters living there as their primary home can claim the credit.

Part II does not apply to new construction. The improvement has to be to an existing home you improve or add onto.³

Filling Out Part I

Start Part I by entering the address of the home where the property was installed. Then enter your total 2025 costs on the line for each qualifying category:

Solar electric property (panels generating electricity for the home)
Solar water heating property, for domestic water only, not pools or hot tubs
Small wind energy property
Geothermal heat pump property
Battery storage technology with a capacity of at least 3 kilowatt-hours⁴
Qualified fuel cell property, principal residence only, capped at $500 per half-kilowatt of capacity²

For each category, include the equipment cost plus labor for on-site preparation, assembly, and original installation. Wiring and piping that connects the system to the home also count.²

Total the costs, multiply by 30% to get your tentative credit, and add any carryforward from last year’s Form 5695. Part I is nonrefundable, so the form walks you through a worksheet comparing your credit to your remaining tax after other credits. Anything you cannot use in 2025 carries to 2026.²

Filling Out Part II

Part II has strict annual dollar caps, and the rules about which costs count differ by category. The credit rate is 30%.

Section A: Building Envelope

Section A covers insulation, exterior doors, and exterior windows and skylights. Only materials count; labor is excluded.³ Annual limits:⁶

Exterior windows and skylights: $600 total per year
Exterior doors: $250 per door, $500 total per year
Insulation and air sealing: no separate sub-cap, but counts against the $1,200 overall limit

Windows and skylights must carry Energy Star Most Efficient certification; doors must meet applicable Energy Star requirements.⁷ Enter the QMID for each qualifying door, window, and skylight on the designated lines.

Section B: Residential Energy Property

Section B is HVAC systems, water heaters, and related equipment. Labor to install this equipment does count.² HVAC equipment and water heaters have to meet or exceed the highest efficiency tier set by the Consortium for Energy Efficiency (CEE) as of the beginning of the year the property was placed in service.⁷

Most items are individually capped at $600 and count toward the $1,200 overall limit. Heat pumps, heat pump water heaters, and biomass stoves and boilers get their own separate bucket of up to $2,000 that does not count against the $1,200.⁶ The combined maximum for a single year is $3,200.

Every energy property line needs a QMID. If you installed multiple items of the same type, put the most expensive item’s QMID on the primary line and attach a statement listing the QMID and cost of each additional item.²

Electrical Panel Upgrades

Panel work qualifies if it is done consistently with the National Electric Code, the panel has a load capacity of at least 200 amps, and the upgrade is paired with another qualifying improvement that the panel enables.⁶ It falls under the $600-per-item cap and the $1,200 overall limit. A standalone panel upgrade with no other qualifying project does not count.

Home Energy Audits

A qualified audit of your principal residence earns up to $150, inside the $1,200 overall limit.³ The written report has to identify the most significant and cost-effective improvements with estimated energy and cost savings for each. The auditor must be certified by a qualified certification program listed by the Department of Energy, and the report must include the auditor’s name, taxpayer identification number, and the name of the certification program.²

Applying the Caps

After entering amounts for each category, the form totals your Part II credit against the $1,200 general cap and the separate $2,000 heat-pump-and-biomass cap. The credit is nonrefundable, and there is no carryforward for Part II. If your tax liability cannot absorb the credit in 2025, the excess is lost.

Subtract Rebates and Subsidies Before You Calculate

If you got a utility rebate or a federal, state, or local subsidy for the purchase or installation, and the amount was not included in your gross income, subtract it from your costs before applying the 30%.² This applies even if the subsidy was paid directly to the contractor.

Say you paid $10,000 for a heat pump and got a $2,000 nontaxable utility rebate. Enter $8,000 on Form 5695 and take 30% of that. Financing under a government program designed to subsidize energy conservation projects also reduces your eligible costs. Skipping this step is a common error, and the IRS can cross-reference utility rebate data.

Move the Totals to Schedule 3

The final credit numbers go to Schedule 3 (Form 1040). Part I, line 15, goes to Schedule 3, line 5a. Part II, line 32, goes to Schedule 3, line 5b.⁸ Schedule 3 totals these with other credits on line 8, which flows to Form 1040, line 20. Tax software handles the transfer automatically. Paper filers attach the completed Form 5695 to the return.

Keep the Records

Hold onto receipts, manufacturer certifications, QMID documentation, energy audit reports, and your completed Form 5695 for at least three years from the date you filed or two years from the date you paid the tax, whichever is later.⁹ That is the window for filing an amended return and the window during which the IRS can question a credit.

If the IRS finds you overstated costs, used a non-qualifying product, or failed to reduce your basis for a rebate, the credit is disallowed and a 20% accuracy-related penalty may apply on the resulting underpayment.¹⁰ The manufacturer certifications and QMIDs are your defense if a letter arrives two years from now, so file them somewhere you can find them.

1
Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under Public Law 119-21
2
Internal Revenue Service. Instructions for Form 5695 (2025)
3
Internal Revenue Service. Energy Efficient Home Improvement Credit
4
Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
5
Internal Revenue Service. Frequently Asked Questions About Energy Efficient Home Improvements and Residential Clean Energy Property Credits – Energy Efficient Home Improvement Credit – Qualifying Residence
6
Office of the Law Revision Counsel. 26 USC 25C – Energy Efficient Home Improvement Credit
7
Internal Revenue Service. Frequently Asked Questions About Energy Efficient Home Improvements and Residential Clean Energy Property Credits – Energy Efficient Home Improvement Credit – Energy Efficiency Requirements
8
Internal Revenue Service. 2025 Schedule 3 (Form 1040) – Additional Credits and Payments
9
Internal Revenue Service. How Long Should I Keep Records?
10
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments