If you’ve been thinking about making your home more energy efficient, now’s the time!
Energy efficient home improvements like insulation and heat pumps are currently eligible for thousands of dollars in savings through the Energy Efficient Home Improvement Tax Credit (25C).
But Congress is voting on new legislation that would eliminate the 25C tax credit at the end of 2025.
Keep reading to learn more about clean energy tax credits, what’s changing in 2025, and how you can save on your home upgrades.
What’s Changing with the 25C Tax Credit in 2025?
The current version of the Energy Efficient Home Improvement Tax Credit was created by the Inflation Reduction Act (IRA) back in 2022 and is set to run through 2032.
Unfortunately, that may be changing soon.
In May, the House of Representatives passed a new bill, which is now under Senate review. If it passes the Senate and becomes law, it would eliminate the 25C tax credit for any upgrades completed after 2025.
That means you would need to complete qualifying improvements by December 31, 2025, at the very latest to lock in the 30% savings. Any upgrades completed in 2026 and beyond would not qualify.
What Is the 25C Tax Credit?
The Energy Efficient Home Improvement Tax Credit (25C) saves you money on home improvements that lower energy costs, make your house more comfortable, and reduce your carbon footprint. You can claim up to $3,200 per year on energy efficiency improvements with the 25C tax credit.
How Much Can You Save?
Qualifying improvements fall into two categories:
$2,000 for Heat Pumps
You can claim up to $2,000 per year for:
- Central heat pumps
- Ductless mini split heat pumps
- Heat pump water heaters
$1,200 for Energy Efficiency
You can claim up to $1,200 per year for:
- Insulation and air sealing
- Windows and doors
- Energy efficient furnaces, boilers, and water heaters
- Energy efficient central air conditioners
- And more
How to Claim the Tax Credit Before It’s Gone
It’s easy to claim the 25C tax credit for insulation, heat pumps, or another qualifying upgrade.
To claim the credit, you must:
- Make a qualifying improvement before the last day of the year.
- File IRS Form 5695 with your federal tax return.
Just remember, you can only claim the tax credit in 2025 if your project is completed by the last day of the year. If the installation isn’t completed by then, it doesn’t qualify—even if you’ve signed a contract or paid an invoice.
State Rebates Are Still Going Strong in Connecticut!
The 25C tax credit has been a valuable tool for helping homeowners across the country make upgrades that reduce energy costs and cut fossil fuel use, and its potential expiration would be a big loss.
The good news? Here in Connecticut, you have access to one of the best state energy programs in the country. Through Energize Connecticut™ and Home Energy Solutions, you can save thousands on upgrades like:
- Insulation and air sealing
- Heat pump HVAC systems
- Heat pump water heaters
- Replacement windows
At New England Smart Energy Group, we’re your one-stop shop for Home Energy Solutions assessments, energy efficiency upgrades, and rebate assistance. We’ll help you maximize your savings, whether the tax credit is eliminated or not.
