FEDERAL ENERGY EFFICIENT HOME IMPROVEMENT CREDIT (25C)

Federal 25C home energy audit tax credits

The 25C Energy Efficient Home Improvement Tax Credit makes it more affordable for Americans to conduct a home energy audit and complete other upgrades to improve home energy efficiency.

View other eligible projects under this tax credit:

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Disclaimer: The information presented here is for educational purposes only. It is not intended to provide specific tax guidance. For questions regarding your individual tax situation, we suggest consulting with your tax advisor.

Tax Credit

Up to $150

Available now

What is the 25C home energy audit tax credit?

The federal government recently passed a law that offers all households who pay federal income taxes up to a $150 credit for a home energy audit for their primary residence.

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The 25C Energy Efficient Home Improvement Tax Credit provides a tax credit for a home energy audit up to 30% of project costs, capped at $150. 

A home audit involves a certified energy auditor coming to your house, calculating how much energy you use, and recommending how you can improve your home to save money on energy costs. 

Home energy audits are just one of the home improvements that qualify for the 25C Energy Efficient Home Improvement Credit. Projects like heat pumps, heat pump water heaters, and insulation qualify as well.

Project Type:Electrical componentsHow much funding can you receive from 25C for qualifying projects?:

Up to 30 percent, generally capped at $600 per year, for the items listed below:

  • Panelboards
  • Sub-paneboards
  • Branch circuits
  • Feeders
Project Type:Heat pumps and heat pump water heaters How much funding can you receive from 25C for qualifying projects?:

Up to 30 percent, capped at $2,000 per year for qualified:

  • Electric heat pumps
  • Electric heat pump water heaters
Project Type:Weatherization (insulation, air sealing, and ventilation)How much funding can you receive from 25C for qualifying projects?:

Up to 30 percent, capped at the following amounts for each type of project:

  • Insulation and air sealing: $1,200
  • Exterior doors: $250 per door, $500 total
  • Exterior windows and skylights: $600

All weatherization projects are combined with electrical panel upgrades for a total project cap of $1,200 per year.

Project Type:Home energy auditHow much funding can you receive from 25C for qualifying projects?:Up to $150. Home energy audits must be performed by a certified home energy auditor, and include a full home inspection and report to qualify.

Source: IRS

The 25C Energy Efficient Home Improvement Credit is limited to $2,000 per year for qualifying heat pump water heater installations, and there is a $3,200 yearly cap for all qualifying 25C tax credits combined. 

The good news is that there’s no lifetime cap, so you can continue to make efficiency upgrades year after year and claim credits for each year’s qualifying home improvements. 

If you’re interested in an energy audit and would like to claim the 25C tax credit, talk to your energy auditor before starting the project.

Tax credit limitations

The 25C Home Energy Audit tax credit may cover up to 30% of your energy audit costs, capped at $150.

Generally, you must subtract any price adjustments from the cost of the item. This can mean rebates, utility subsidies, financial incentives, and anything else that lowers the price point. This part can get a little tricky, so be sure to check the Frequently asked questions about energy efficient home improvements and residential clean energy property credits for more information.

The 25C tax credit is “non-refundable,” which means that you can't get back more than you pay in federal income taxes. 

If 30% of your project’s cost is $100, but you only owe $75 in federal income taxes that year, you would receive a $75 credit.

Renters and homeowners making upgrades to their primary home

Renters and homeowners can use this tax credit for audits in homes that are already built. Homeowners cannot use this tax credit for secondary homes.

Landlords can never claim this credit for homes they rent out but do not use as a residence themselves.

For more information, see Frequently asked questions about energy efficient home improvements and residential clean energy property credits.

No income requirements 

There are no income limitations for the 25C Tax Credit — but like nearly all federal tax credits, you can only use it if you pay federal income taxes.

The IRS defines a qualified home energy auditor as “an individual who is certified by one of the qualified certification Programs listed on the Department of Energy certification programs for the Energy Efficient Home Improvement Credit (Section 25C) at the time of the audit, or under the supervision of a qualified home energy auditor.” 

Before hiring a contractor for your home energy audit, reach out to them to see if they have completed at least one of the certification programs listed on the website linked above. If you’re having trouble finding a qualifying auditor, check if your utility can connect you to an auditor. Many utilities offer free or subsidized home energy audits to their customers!

In addition, your home energy auditor must provide you with a written, signed report that includes the following information:

  • The home energy auditor’s name and their employer’s EIN or taxpayer identification number

  • A statement that they have been certified by completing one of the qualifying certification programs and which program they completed

  • Identification of the improvements that would save the most money in terms of home energy costs

  • An estimate of how much money each improvement would save

For more information on the home energy audit tax credit, see the IRS Notice 2023-59.

  1. Keep track of (or track down) the invoice from your auditor. 

  2. Fill out IRS Form 5695, Residential Energy Credits. For instructions on how to fill out the form, including more in-depth information about individual amounts you can claim, see the IRS’s Instructions for Form 5695.

  3. Submit the form along with your annual tax return. 

  4. You may enjoy a lower tax bill or bigger refund!

Discover other incentives with the incentives calculator!

There are other incentives that you may qualify for. Our incentive calculator will show you a personalized list of incentives.

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