The 2025 sunset
Legislation enacted in 2025 terminated the 25C credit for property placed in service after December 31, 2025. Projects completed during 2025 remain fully claimable on the 2025 return, which for many households is the return being filed right now. If your installation straddled the year-end, what counts is when the property was placed in service, not when it was paid for or ordered.
What qualifies
Insulation, air sealing materials, energy-efficient windows, doors, skylights, heat pumps, heat pump water heaters, central air conditioners, natural gas/propane/oil water heaters and furnaces that meet efficiency standards. The efficiency standards are specific and product-level; the manufacturer's certification statement is what proves a given model qualifies.
Annual limits
$1,200 annual credit cap most items. $2,000 for heat pumps and heat pump water heaters (separate bucket). $500 for doors ($250 per door). $600 for windows. $150 for home energy audit. The two buckets stack: a heat pump plus insulation in the same year could reach $3,200 of combined credit.
How to claim it
Form 5695, Part II, filed with the return for the year the property went into service. For 2025 installations, a product identification number from the manufacturer is required for most items, so gather invoices and the manufacturer certification now rather than at the filing deadline. Labor counts for some categories (like heat pumps) and not others (like insulation), and the invoice needs to break that out.
Nonrefundable, no carryforward
The 25C credit can only offset tax you owe for that year; any excess simply evaporates. There is no carryforward. Households with little or no tax liability in 2025 get little or nothing from the credit, no matter what was installed. That's a fact worth knowing before assuming the full 30% comes back.
Common questions
- Can I claim this every year?
- Through 2025, yes: the 25C credit had annual limits, not lifetime, so multiple project years each got their own cap. The credit is not available for property placed in service after 2025.
- Is the credit refundable, or does unused credit carry forward?
- Neither. It offsets that year's tax and any excess is lost, which makes checking your expected liability part of the claim.
- Can renters claim it?
- For improvements to a home you live in, yes in some categories even without owning it. Landlords can't claim 25C for tenant-occupied property; it's a credit for your own residence.
- Do solar panels fall under this credit?
- No, solar belongs to the separate residential clean energy credit with its own rules and its own 2025 sunset under the same legislation. Don't mix the two on Form 5695.
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