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What’s in this quick guide to your energy-saving upgrades:
- How Energy-Efficient Tax Credits Work
A clear breakdown of how federal, state, and local programs reduce your tax bill when you install qualifying upgrades. - The Difference Between Tax Credits & Incentives
What the current federal programs offer—including the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit—and how much homeowners may be eligible to claim. - Which Home Improvements Qualify
Insight into which windows, doors, roofing, insulation, appliances, and systems typically meet eligibility requirements—and why working with a trusted home improvement partner matters. - How to Claim Energy-Efficient Tax Credits
Key steps for filing, including IRS forms, installation deadlines, and why it’s important to consult a tax professional. - Why Energy-Efficient Upgrades Are Still Worth It—Even as Credits Expire
How these improvements continue to boost comfort, reduce energy use, and increase home value long after incentive programs end. - How Great Day Improvements Can Help
Where to explore project inspiration, understand your options, and request a free quote so you can renovate with confidence.
Home renovation isn’t just about upgrading the look or function of your home. It’s also about improving your home’s energy efficiency. By replacing doors and windows, roofing and insulation, appliances, and systems with newer, more energy-efficient models, homeowners will not only lower their household’s energy usage, but they’ll also save money on utility bills.
Certain energy-efficient upgrades are eligible for home renovation tax credits, but the federal programs offering such credits are about to expire. While state and local incentives are also available, they might also be affected by the program changes at the federal level.
If you have recently made any energy-efficient upgrades to your home or plan to do so on or before December 31, 2025, here’s what you’ll need to know about claiming any federal, state, or local home energy tax credits.
How Do Energy-Efficient Tax Credits Work?
Homeowners who make eligible energy-efficient home upgrades can often get some sort of break at tax time, usually a tax credit. This means you will pay less at tax time, and you might even get a tax refund. Some programs, usually at the state or local levels, might offer additional incentives, including rebates. The Database of State Incentives for Renewables & Efficiency is a good resource for finding which tax credits for energy efficiency are available in your area.
Note that in order to qualify for any tax credits for home improvements, the home must usually serve as your primary residence, which is defined as the place you live for most of the year. If you’re a landlord and rent the property to a tenant or you use it as a vacation home, you won’t be able to claim the tax breaks.
If you use your primary home for business, you will get full credit for any eligible clean energy expenses, as long as you only use your home up to 20% for business. If you use it for more than that, you still may be able to get a credit based on the non-business expenses. However, if your home is used solely for business, you can’t claim any tax incentives for energy efficiency.
How Do Energy-Efficient Tax Incentives Work?
The Residential Clean Energy Credit, which was enacted in 2022, allows homeowners to deduct up to 30% of the cost of new systems, including labor and installation, from their tax bill. Eligible systems include solar panels, solar-powered water heaters, geothermal pumps, and other clean energy technologies. For most projects, there is no dollar limit on these energy-efficiency tax incentives.
The Energy Efficient Home Improvement Credit, enacted in 2023, offers tax credits for energy-saving improvements made to existing homes in two parts:
- Homeowners can get up to a $2,000 tax credit for: heat pumps, heat pump water heaters, biomass stoves and boilers
- Homeowners can get up to a $1,200 tax credit: air conditioners, water heaters, hot water boilers, insulation, exterior doors, windows, and skylights
If your home upgrades span both parts, then you are eligible to get up to $3,200 in tax credit. However, the credit is only valid for the year the appliances or systems were installed, not just purchased.
Which Energy-Efficient Upgrades Are Eligible?
Notice we use the word “eligible” when it comes to upgrades. That’s because not every upgrade in these home improvement categories qualifies. Your best bet is to work with a home improvement company like Great Day Improvements, where our knowledgeable staff can walk you through options for upgrades that will qualify. If you’re purchasing appliances and other systems on your own, shop carefully with reputable retailers who can guide you to options that will qualify.
In general, Energy Star products are a good place to start. Even then, you’ll need to confirm your climate zone to see if installing that product or system in your area qualifies you for the tax credit. Again, when you work with a reputable company like Great Day Home Improvements, we’ll offer you the best options for your home’s energy efficiency and your tax credit eligibility.
How Do You Claim Tax Credits for Energy-Efficient Upgrades?
Federal tax incentives are set to expire on December 31, 2025, so time is of the essence to not simply to purchase the upgrades, but have them installed.
If you have already completed your home improvement projects, then you’ll need to add Form 5695, Residential Energy Credits from the IRS when you file your taxes in April. Fill out the sections on the form as they apply to your home improvement project and submit it with the rest of your prepared tax paperwork.
That said, we at Great Day Improvements are in the home improvement business, not the tax preparation business. This is our friendly reminder that you should always consult a tax professional for anything related to tax preparation to ensure you reap all the credits and refunds for which you are eligible.
Ready to take advantage of expiring tax credits and lower your energy bills? Explore our gallery of home improvements and renovations.
Why Energy-Efficient Upgrades Are Still Worth It
If you have not yet made any energy-efficient upgrades to your home and you are now learning that the tax incentive programs are ending, you might be wondering whether it’s still worth it to install energy-efficient upgrades.
The answer is a resounding yes. In conserving energy with the more efficient upgrades, you are already saving money on utility bills each month. Those savings will accrue and, in time, the upgrades will pay for themselves.
It’s also important to remember that any improvements you make to your home can increase its value. If you are looking to sell your home in the near future, energy-efficient upgrades may result in higher and/or quicker offers from buyers. But even if you have just moved into your home and are settling in, energy-efficient upgrades will save you money month after month.
Don’t miss your chance to save money and improve your home’s comfort! Request a free quote today.
Frequently Asked Questions
Can I get energy efficiency tax incentives if I made home improvements in 2025?
If you made energy-efficient home improvements in 2025, you are likely still eligible to get the tax incentives. It’s certainly worth consulting a tax professional, who will guide you through amending your tax return from the year of installation so that you can get the tax credit for which your upgrades are eligible.
What’s the difference between a tax credit and an incentive?
A tax credit directly reduces the amount of federal income tax you owe—often making it more valuable than a deduction. Incentives, on the other hand, may come from state or local programs and can include rebates, discounts, or cash-back programs offered after installation. Many homeowners combine both, which can help lower the overall cost of a renovation and make energy-saving improvements even more attainable.
Which home improvements typically qualify for energy-efficient tax credits?
Upgrades that improve your home’s energy performance—such as qualifying windows, exterior doors, skylights, insulation, heat pumps, water heaters, and certain roofing materials—may be eligible. Because not every product on the market qualifies, working with a trusted home improvement partner like Great Day Improvements ensures you’re choosing upgrades that meet federal efficiency standards and are appropriate for your climate.
What is the process of claiming a tax credit for energy efficient home improvements?
Download Form 5695, Residential Energy Credits, and fill out the applicable section at tax time. Remember, the credit is for the year of installation, not just the year of purchase. While the IRS does have guidance on the website for those who prepare their own taxes, it’s always advisable to seek the guidance of a tax professional to ensure you get the most tax credit allowed.
How long do I have to claim my energy efficient home improvement tax credits?
The federal tax credit program sunsets on December 31, 2025. This means that anything installed in 2026 and beyond will not be eligible for federal tax credits.
Are energy-efficient upgrades still worth it even as tax credits expire?
Absolutely. While incentives help reduce upfront costs, the long-term value of energy-efficient upgrades goes far beyond tax season. Homeowners continue to benefit from lower utility bills, improved comfort, increased home value, and reduced environmental impact for years to come. Energy upgrades are one of the few improvements that truly pay you back over time.
