The Energy Efficient Home Improvement Credit (Part II of Form 5695) is generally available for qualifying energy-efficient improvements made to a qualified residence used by the taxpayer as a home in the United States. However, the credit does not generally apply to properties used solely as rental or investment properties.
Eligibility Requirements
Qualified Residence Requirement
To qualify:
- The property must be located in the United States
- The property must be used by the taxpayer as a residence during the tax year
- Improvements must be installed in a qualifying home used by the taxpayer
While most claims involve a primary residence, certain secondary homes used as residences may also qualify if they meet IRS requirements. Rental-only properties generally do not qualify.
Original Use Requirement
- The taxpayer must be the original user of the installed property
- The property must be newly placed in service during the tax year
What Improvements May Qualify
Eligible improvements generally include:
- Insulation and air sealing materials
- Exterior doors, windows, and skylights
- Heat pumps and heat pump water heaters
- Central air conditioners
- Natural gas, propane, or oil furnaces and water heaters
- Electrical panel upgrades (subject to limits)
- Home energy audits
Credit Amounts and Limits
- Generally 30% of qualified expenses
- Subject to annual limitations (commonly up to $1,200 total per year for most improvements)
- Certain qualifying heat pump and biomass property may qualify for a separate higher annual limit (up to $2,000)
Important Note
The credit is nonrefundable and is only available for qualifying property installed in a home that meets IRS residency requirements. Rental or investment-only properties do not qualify.
Source:
Form 5695 Instructions (2025)
Disclaimer: Always verify eligibility and requirements with the current IRS Form 5695 and its instructions, or consult a tax professional. State-specific rules may also apply.