Under Form 5695, Part II — Energy Efficient Home Improvement Credit, taxpayers may claim a credit equal to 30% of the total amount paid or incurred for qualified energy efficiency improvements, residential energy property, and home energy audits installed or performed in 2025. The credit is subject to specific limits and eligibility criteria based on the type of improvement or property.
Types of Eligible Improvements and Property
- Qualified Energy Efficiency Improvements: Includes items such as insulation, air sealing, exterior doors, windows, skylights, central air conditioners, water heaters (natural gas, propane, oil), furnaces or hot water boilers, and improvements to electrical systems (panelboards, subpanelboards, branch circuits, feeders).
- Residential Energy Property: Includes electric or natural gas heat pumps, heat pump water heaters, biomass stoves or boilers, and certain high-efficiency heating and cooling systems.
- Home Energy Audits: A credit is available for home energy audits conducted by a Qualified Home Energy Auditor, with a maximum credit of $150 per audit.
Credit Limits
- Total Combined Credit Limit: $1,200 for qualified energy property (excluding heat pumps and biomass stoves/boilers).
- Individual Item Limits: $600 for any single qualified energy property item (e.g., windows, central air conditioners, water heaters).
- Exterior Doors: $250 per door, with a total limit of $500 for all exterior doors.
- Windows and Skylights: Combined limit of $600.
- Heat Pumps and Biomass Systems: Combined credit limit of $2,000 for heat pumps, heat pump water heaters, biomass stoves, and biomass boilers.
- Home Energy Audits: Maximum credit of $150 per audit.
Additional Requirements
- Home Location: The improvements must be made to the taxpayer’s main home located in the United States.
- Home Energy Audit Requirement: To claim the home energy audit credit, a written report must be prepared by a Qualified Home Energy Auditor certified by a Qualified Certification Program. The report must include the auditor’s name and TIN/EIN, certification attestation, and the name of the certification program.
- Enabling Property: Costs for electrical upgrades (panelboards, subpanelboards, etc.) are eligible only if installed to enable the use of a qualified energy-efficient improvement or property.
- Subsidized Financing: Amounts from subsidized energy financing (federal, state, or local programs) cannot be used to calculate the credit.
- Joint Occupancy or Ownership: Joint occupants or owners must allocate the credit based on their share of expenses and attach a statement explaining the allocation. Each occupant must complete their own Form 5695 if jointly occupying a home.
Source:
Form 5695 Instructions (2025)
Disclaimer: Always verify details with the current IRS Form 5695 and its instructions, as well as your state’s Department of Revenue. For complex situations, consult a tax professional or CPA.