Section 25C of the Internal Revenue Code, the Energy Efficient Home Improvement Credit, is a nonrefundable federal tax credit worth 30% of the cost of qualifying upgrades like insulation, heat pumps, high-efficiency windows, and electrical panel work, capped at $3,200 per year. The One Big Beautiful Bill Act, signed in July 2025, eliminated the credit for any property placed in service after December 31, 2025.1Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under the One Big Beautiful Bill You can still claim it on a 2025 return, or amend a 2023 or 2024 return to pick it up, but installations in 2026 and beyond do not qualify.
The Credit Ended After 2025
The cutoff is based on when the property was placed in service, meaning the date installation was complete and the equipment was ready to use. A heat pump purchased in late 2025 but installed in January 2026 does not qualify. Neither does a window order delivered in 2025 but installed the next spring.1Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under the One Big Beautiful Bill
Two groups still have a reason to pay attention. If you completed qualifying work during 2025 and have not yet filed, the credit goes on your 2025 return. If you missed claiming the credit on a 2023 or 2024 return for work done in those years, you may be able to amend. The annual caps reset each tax year, so each year of improvements stood on its own. Everything that follows describes the rules as they applied through December 31, 2025.
Who Could Claim It
Only individual taxpayers could claim Section 25C. Corporations and other business entities were excluded, and the home had to be located in the United States.2Office of the Law Revision Counsel. 26 USC 25C – Energy Efficient Home Improvement Credit
Beyond that, eligibility split along the lines of what you installed. For building envelope items (windows, doors, insulation, skylights, air sealing), the home had to be one you both owned and used as your principal residence. Renters and second-home owners were shut out of those.
For energy equipment (heat pumps, central air conditioners, furnaces, water heaters, biomass stoves, electrical panel upgrades), the rule was looser. The home just had to be a residence you used. Renters could claim the credit, and a second home counted.3Internal Revenue Service. Frequently Asked Questions About Energy Efficient Home Improvements and Residential Clean Energy Property Credits – Qualifying Residence That distinction surprised a lot of people and meant a renter who paid for a qualifying heat pump could still claim it.
The credit applied only to existing homes. Improvements made as part of original construction did not count.
What Qualified and the Annual Caps
The credit was always 30% of qualifying costs, but a series of annual caps controlled what you could actually take. The maximum in any single year was $3,200, and it only reached that figure by combining two separate pools: a $1,200 general cap and a $2,000 heat pump and biomass cap that sat outside the general cap.4Internal Revenue Service. Energy Efficient Home Improvement Credit
The $1,200 General Pool
Inside the $1,200 cap, individual sub-limits applied to each category:
- Windows and skylights meeting ENERGY STAR Most Efficient criteria: $600 per year.5ENERGY STAR. Windows and Skylights Tax Credit
- Exterior doors meeting ENERGY STAR requirements: $250 per door, $500 total per year.6Internal Revenue Service. Publication 5967 – Energy Efficient Home Improvement Credit
- Insulation and air-sealing materials meeting the applicable International Energy Conservation Code standard: no sub-cap beyond the $1,200.2Office of the Law Revision Counsel. 26 USC 25C – Energy Efficient Home Improvement Credit
- Standard energy property (central air conditioners, natural gas or propane furnaces, hot water boilers, non-solar water heaters) meeting the highest Consortium for Energy Efficiency tier: $600 per item.
- Electrical panel upgrades of at least 200 amps meeting the National Electric Code: $600 per item.7ENERGY STAR. Electric Panel Upgrade Tax Credit
- Home energy audits by a Department of Energy-recognized certified auditor: $150 per year.8Department of Energy. US Department of Energy Recognized Home Energy Auditor Qualified Certification Programs for the Energy Efficient Home Improvement Credit (Section 25C)
One easy-to-miss detail: for building envelope items (windows, doors, insulation, skylights), only the material cost counted. Installation labor did not qualify.4Internal Revenue Service. Energy Efficient Home Improvement Credit For energy equipment and electrical panel work, labor did count.
The efficiency bar was often higher than homeowners expected. A qualifying gas furnace, for instance, needed an AFUE of 97% or higher, so many furnaces marketed as “high-efficiency” at 90% to 92% did not make the cut.9ENERGY STAR. Furnaces (Natural Gas, Oil) Tax Credits
The Separate $2,000 Heat Pump Pool
The $2,000 annual cap applied to electric or natural gas heat pumps, heat pump water heaters, and biomass stoves or boilers with a thermal efficiency rating of at least 75%.2Office of the Law Revision Counsel. 26 USC 25C – Energy Efficient Home Improvement Credit Because this cap sat outside the general $1,200 limit, a homeowner who installed a qualifying heat pump ($2,000), new windows ($600), and two exterior doors ($500) in the same year could claim up to $3,100. That was the only way to approach the $3,200 ceiling.
The Nonrefundable Catch
The credit is nonrefundable. It can reduce your federal income tax liability to zero but cannot generate a refund, and unused credit cannot be carried forward.4Internal Revenue Service. Energy Efficient Home Improvement Credit If your 2025 tax liability is $1,500 and you qualify for $3,200 in credit, you get $1,500 and lose the remaining $1,700.
Filing a 2025 or Amended Return
You claim the credit on IRS Form 5695, Residential Energy Credits, filed with your Form 1040.10Internal Revenue Service. Instructions for Form 5695 Residential Energy Credits The form walks through each category, applies the sub-caps and the $1,200 and $2,000 ceilings, and produces the number that flows to your 1040. Match the credit to the tax year the property was placed in service, not the year you paid for it.
You do not attach receipts or product documentation to the return, but you need to keep them in case of audit. Useful records include itemized invoices that break out product cost from installation labor (because the two are treated differently depending on the item) and documentation identifying the specific product installed.
Manufacturer Identification Numbers
For property placed in service during 2025, qualifying manufacturers were required to assign a Qualified Manufacturer Identification Number (QMID) to each item.11Internal Revenue Service. Energy Efficient Home Improvement Credit Qualified Manufacturer Requirements Insulation, air-sealing materials, and home energy audits were exempt from the ID number requirement.12Internal Revenue Service. Frequently Asked Questions About Energy Efficient Home Improvements and Residential Clean Energy Property Credits – PIN Requirements For other products, the number usually appears on the manufacturer’s tax credit documentation, a product label, or a compliance sheet. If you cannot find it, the manufacturer’s website or customer service is the fastest route. A 17-character Product Identification Number (PIN) was slated to replace the QMID for property placed in service on or after January 1, 2026, but that requirement is effectively moot now that the credit itself has ended.
The Department of Energy also runs a product lookup tool where you can enter a model number to confirm whether it met the CEE efficiency tier that Section 25C required.13Department of Energy. Tax Credit Product Lookup Tool If you are preparing a 2025 or amended return and are not sure your equipment qualified, start there.