Two valuable tax credits for energy-efficient home improvements are ending on December 31, 2025. If you’ve been considering upgrades like new windows, solar panels, or a heat pump, now is the time to act.
The Energy Efficient Home Improvement Credit (EEHIC) and the Residential Clean Energy Credit (RCEC) allow homeowners to deduct a portion of qualifying expenses from their federal tax returns. Originally set to expire in 2032 under the Inflation Reduction Act, these credits were cut short by the passage of the One Big Beautiful Bill Act.
Households claimed an average of $880 through the EEHIC in 2023, while the average deduction for the RCEC was $5,000. These aren’t small numbers, and the clock is ticking. Here’s what you need to know about claiming these credits before they disappear.
What qualifies for the Energy Efficient Home Improvement Credit?
The EEHIC covers a variety of upgrades designed to reduce your home’s energy consumption. To qualify, improvements must meet energy efficiency standards set by the Department of Energy or the Energy Star program.
Eligible projects include:
- Windows, doors, and skylights: Energy Star-certified replacements can help reduce heating and cooling costs.
- Insulation: Adding or upgrading insulation in walls, attics, or floors improves your home’s thermal efficiency.
- HVAC systems: Air conditioners, furnaces, and heat pumps that meet efficiency standards are eligible.
- Biomass stoves and boilers: These renewable heating sources can also qualify.
- Home energy audits: A certified auditor can assess your home’s energy use and recommend improvements.
- Electrical upgrades: Necessary electrical work to support energy-efficient systems counts toward the credit.
The credit is worth 30% of qualified expenses, with a maximum deduction of $3,200. Within that limit, you can claim up to $1,200 for doors, windows, skylights, A/C units, and insulation combined. A separate $2,000 deduction is available for heat pumps, water heaters, or biomass stoves and boilers.
Home energy audits qualify for a $150 credit, while electrical upgrades count toward the $1,200 limit.
Keep in mind that this credit only applies to your primary residence in the U.S. Rental properties and new construction don’t qualify.
What qualifies for the Residential Clean Energy Credit?
The RCEC is designed for larger renewable energy projects. Unlike the EEHIC, there’s no dollar cap on the amount you can claim (except for fuel cell property, which is limited to $500 per half-kilowatt of capacity).
Eligible improvements include:
- Solar panels: Rooftop solar systems are the most common claim under this credit. With an average installation cost of $27,000, homeowners can save over $8,100.
- Wind turbines: Small residential wind energy systems qualify.
- Geothermal heat pumps: These systems use the earth’s natural temperature to heat and cool your home efficiently.
- Battery storage: Energy storage systems paired with renewable energy sources are eligible.
- Fuel cells: Systems that generate electricity using hydrogen or other fuels can qualify.
The credit covers both the purchase price and installation costs, but not interest or fees on loans. The system must be new, used for the first time, and installed before January 1, 2026.
Both homeowners and renters can claim the RCEC, though landlords or other property owners are not eligible.
According to a study by the Lawrence Berkeley National Laboratory, three-quarters of homeowners who installed rooftop solar were able to lower their electricity bills. The median annual savings came to $691.
How to claim the credits on your tax return
Claiming either credit requires filing Form 5695, Residential Energy Credits, with your 2025 federal tax return.
For the Energy Efficient Home Improvement Credit, complete Part II of the form. For the Residential Clean Energy Credit, fill out Part I.
You’ll need to provide details about the improvements you made, including costs and the date of installation. Keep receipts, invoices, and manufacturer certifications on hand in case the IRS requests documentation.
Both credits are nonrefundable, meaning the amount you receive can’t exceed your total tax debt. If your tax liability is $2,000 and you qualify for a $3,000 credit, you’ll only receive $2,000.
What projects should you prioritize?
With just a few months left, you may not have time to complete every project on your wish list. Gilbert Michaud, an environmental policy professor at Loyola University, recommends focusing on smaller upgrades that can be finished quickly.
“Homeowners may want to focus on the smaller projects that can still capture the tax credits and cut energy bills,” Michaud told CNBC Select. “These types of projects can be done in a matter of weeks and will deliver immediate energy savings.”
Practical options include:
- Window and door replacements: These upgrades improve insulation and can be completed within a few weeks.
- Insulation: Adding insulation to your attic or walls is a straightforward project with immediate benefits.
- Heat pumps: While more complex than windows or insulation, heat pumps can often be installed in a matter of weeks and qualify for a higher credit.
- New appliances: Energy-efficient water heaters and HVAC systems can reduce utility bills right away.
Larger projects like solar panel installations may take longer to complete, especially with increased demand as the deadline approaches. If you’re considering a major renewable energy upgrade, start planning now to avoid delays.
What happens after the credits expire?
Once these tax breaks sunset, energy-efficient home improvements are expected to decline significantly.
“We know that financial incentives play a major role in adoption rates,” Michaud said. “Without them, many homeowners will downsize, delay or cancel projects altogether.
While some affluent homeowners will still make investments, broader adoption is challenging without policy support.”
However, energy-efficient upgrades still offer long-term value beyond tax savings. Lower utility bills, increased home value, and reduced environmental impact are all benefits that outlast the credits themselves.
According to Zillow, 86% of homebuyers said having at least one climate-resilient feature was an important factor in their buying decision. Homes with energy-efficient features tend to sell faster and for higher prices.
Make your move before it’s too late!
These credits represent a rare opportunity to save thousands of dollars while making your home more efficient. Whether you’re replacing old windows, upgrading your HVAC system, or installing solar panels, acting now could pay off for years to come.
Review the IRS’s list of approved manufacturers to ensure your upgrades meet the necessary standards. Consult with contractors early to secure timelines and avoid last-minute delays. And don’t forget to file Form 5695 with your 2025 tax return to claim your deductions.
The deadline is firm. After December 31, 2025, these credits will no longer be available!