25C — Tax Credit · No Income Test
What it is
The Energy Efficient Home Improvement Credit ("25C") is a non-refundable federal tax credit covering 30% of the cost of qualified energy-efficiency upgrades to your primary residence. It's available every year through 2032 and resets annually — meaning a homeowner can claim it across multiple tax years for separate upgrades.
Annual caps
| Category | Annual cap | Per-item cap |
|---|---|---|
| Heat pumps, heat pump water heaters, biomass stoves | $2,000 | — |
| Insulation & air sealing | $1,200 (envelope) | 30% of cost |
| Exterior doors | $1,200 (envelope) | $250/door, $500 total |
| Exterior windows & skylights | $1,200 (envelope) | $600 total |
| Central AC, gas furnace, boiler, water heater (non-heat-pump) | $1,200 (envelope) | $600 each |
| Home energy audit | $1,200 (envelope) | $150 |
| Electrical panel upgrade | $1,200 (envelope) | $600 |
| MAX TOTAL PER YEAR | $3,200 | — |
Equipment requirements
- Central AC, gas furnace, boiler: CEE Tier 2 efficiency or higher
- Heat pumps and HPWH: ENERGY STAR Most Efficient (in Northern climate zones, additional cold-climate spec)
- Windows: ENERGY STAR Most Efficient
- Doors: ENERGY STAR
- Insulation: meets 2021 IECC criteria
- Heat pump (after 2025): additional manufacturer reporting required for tax credit eligibility
How to claim
- Buy and install qualified equipment in the tax year
- Keep the manufacturer's certification statement, AHRI certificate, and itemized invoice
- File IRS Form 5695 with your federal tax return
- The credit reduces your tax liability dollar-for-dollar (it does NOT generate a refund beyond your taxes owed)
Common gotchas
- Non-refundable: if your federal tax liability is less than the credit, you don't get the difference back. Plan around this.
- Cannot be carried forward to a future year.
- Resets each calendar year — splitting a big project across two years can sometimes double your credit.
- Equipment must be placed in service (operational) in the tax year, not just purchased.