Home energy tax credits for solar, heat pumps, EV chargers, and weatherization

The Inflation Reduction Act (IRA, 2022) expanded the federal residential energy tax credits: 30% off solar with no cap, up to $2,000/yr for heat pumps, and up to $1,200/yr for insulation and air sealing, originally scheduled to run through 2032. The One Big Beautiful Bill Act (OBBBA, signed July 4, 2025) ended them early. §25C and §25D don’t apply to anything installed after Dec 31, 2025, and the §30C EV-charger credit ended for property placed in service after June 30, 2026. A 2026 install earns no federal §25C/§25D credit.

This guide covers what you can still claim (2025 installs, on your 2025 return or an amended return), how the limits and forms worked, and the rebates that remain: state, utility, and HEEHRP.

This is a guide, not tax advice. The credits interact with rental classification, basis tracking, and your overall tax picture in specific ways. Consult a CPA before a six-figure install.

The two main credit categories

These are separate credits with separate limits. Don’t conflate them.

• §25D Residential Clean Energy Credit: solar, geothermal, batteries, wind. 30%, no annual cap. Ended for expenditures made after Dec 31, 2025.
• §25C Energy Efficient Home Improvement Credit: heat pumps, insulation, windows, doors, audits, panels. 30% with annual per-bucket caps. Ended for property placed in service after Dec 31, 2025.

Both are claimed on IRS Form 5695 with your 1040.

§25D Residential Clean Energy Credit (the big one)

For 2025 installs, the credit is 30% of total installed cost (equipment + labor + permits) with no annual dollar cap for most categories. This was the credit that made solar work financially in many markets.

Eligible improvements

• Solar PV systems (panels, inverters, racking, labor)
• Solar water heaters (must be SRCC-certified and serve the home)
• Geothermal heat pumps (ENERGY STAR-certified)
• Wind turbines
• Battery storage with capacity of 3 kWh or more (added by IRA; previously had to be solar-coupled)
• Fuel cells (capped at $500 per 0.5 kW capacity, $1,000/kW)

Termination (OBBBA)

The IRA scheduled 30% through 2032, then 26% in 2033 and 22% in 2034. OBBBA replaced that schedule: there is no §25D credit for expenditures made after Dec 31, 2025. An expenditure is generally treated as made when installation is complete, so a system finished in 2026 doesn’t qualify even if you paid a deposit in 2025.

Refundability and carryforward

The credit is non-refundable: it can’t reduce your tax below zero. But the unused portion carries forward to subsequent tax years (§25D(c)) until used. If you owe $4,000 in tax and your credit is $11,000, you use $4,000 this year and carry $7,000 forward. Useful for households with low current liability and high future income. The statute permits carryforward “to the succeeding taxable year” recursively; how unused credit from pre-2026 installs is treated now that §25D has terminated isn’t fully settled, so confirm with a CPA before relying on a multi-year carryforward.

Eligible homes

• Primary residence: yes
• Second home: yes (except fuel cells, which are primary only)
• Rental property: no. These are personal residence credits. Equipment on a rental is business property, which falls under the business clean-electricity investment credit instead (§48E, which replaced the old §48 credit for property placed in service after 2024). OBBBA ends §48E for solar and wind placed in service after 2027 unless construction began by July 4, 2026; battery storage keeps a longer runway. Whether a residential rental qualifies, and for how much, turns on rules that differ completely from §25D, so talk to a CPA.
• Must be new equipment, not used.

Worked example

You installed a $25,000 solar PV system and a $12,000 battery on your primary residence, completed in 2025.

• Total eligible cost: $37,000
• §25D credit: $37,000 × 30% = $11,100
• If you owe $11,100+ in federal tax, you use the full credit this year. If less, the rest carries forward.

Stack with state and utility incentives separately, but watch the basis treatment carefully:

• Utility rebates that are characterized as “purchase price adjustments” (the typical case) do reduce your §25D credit basis. If the utility rebates $3,000 on a $25,000 solar install, you compute the 30% credit on $22,000, not $25,000.
• State income tax credits generally do not reduce the federal basis. They’re separate tax benefits.
• State or non-utility cash rebates: facts and circumstances. IRS Notice 2013-70 (still the controlling authority) treats most subsidies as basis-reducing if they come from a utility or government program for the same equipment.
• HEEHRP rebates: Treasury guidance is still evolving. Conservative treatment: assume basis reduction. Aggressive treatment: argue HEEHRP is income-tested social-program assistance, not a rebate. Talk to a CPA before claiming the credit on the un-reduced cost.

§25C Energy Efficient Home Improvement Credit

The smaller-dollar credit. 30% of cost with separate caps per category, resetting every year. 2025 was the last year: OBBBA ended §25C for property placed in service after Dec 31, 2025.

Annual caps (not lifetime)

The IRA replaced the old lifetime cap with annual caps, which let you max out the credit each year by phasing projects across tax years. With the credit gone after 2025, that strategy no longer works.

Heat pump bucket: $2,000/yr aggregate for:

• Heat pumps (air-source)
• Heat pump water heaters
• Biomass stoves and boilers (75%+ efficiency)

General improvements bucket: $1,200/yr aggregate, sub-broken into:

• Insulation and air sealing: no separate sub-cap (bounded by the $1,200 bucket; this single category can fill the bucket)
• Exterior windows / skylights: $600 max (total across all windows, not per window)
• Exterior doors: $250 per door and $500 max total (the lower of the two governs)
• Home energy audit: $150 max
• Electrical panel upgrade: $600 max (only if upgrade enables another eligible improvement, e.g. a heat pump)
• Central AC (high-efficiency split-system, not a heat pump): $600 max. Heat pump central AC falls in the $2,000 heat pump bucket, not here.
• Natural-gas / propane / oil furnaces and boilers (high-efficiency, ENERGY STAR-rated): $600 max
• Natural-gas / propane / oil water heaters (high-efficiency, non-heat-pump): $600 max

Total annual cap: $3,200 ($1,200 general + $2,000 heat pump). This is the maximum any single household can claim from §25C in one year.

Equipment requirements

• Heat pumps: must meet CEE Tier 2 (or higher) efficiency standards
• Windows: ENERGY STAR Most Efficient (the higher tier)
• Doors: ENERGY STAR
• Insulation: meets prescriptive criteria (R-value depending on climate zone)
• Manufacturer’s ID: from 2025 onward, products must include a manufacturer-issued PIN. Save the documentation.

Eligibility

• Primary residence only (no second home, no rentals)
• Must be a U.S. residence that you own and use
• Existing home: new construction generally doesn’t qualify

Worked example

You replaced your old gas furnace with a heat pump (installed cost $4,500), added R-49 attic insulation ($1,800), and got a home energy audit ($400), all in 2025.

• Heat pump: $4,500 × 30% = $1,350, capped at $2,000 → $1,350 (under the cap)
• Insulation: $1,800 × 30% = $540, capped at $1,200 → $540 (under the cap)
• Audit: $400 × 30% = $120, capped at $150 → $120 (under the cap)

Total year-1 credit: $2,010.

If you’d also added $2,000 of new ENERGY STAR windows ($600 window cap hit), the general bucket would total $540 + $120 + $600 = $1,260, over its $1,200 cap, so the windows add only $540.

Multi-year stacking strategy (no longer available)

Before OBBBA, a $10,000 insulation project could be split across two tax years (half in December, half in January) to claim the $1,200 cap twice. Since nothing placed in service after Dec 31, 2025 qualifies, there is no second year to split into.

§30C Alternative Fuel Vehicle Refueling

The EV charger credit, with a major IRA-introduced restriction. OBBBA ended §30C for property placed in service after June 30, 2026, so only chargers in service by that date qualify.

• 30% of charger cost (equipment + install) up to $1,000 residential
• Geographic restriction: only chargers in low-income census tracts or non-urban (rural) census tracts qualify

Most suburban driveways are in ineligible census tracts. Check the DOE’s Alternative Fuel Stations eligibility map before spending. Tools like the IRS’s 30C census tract lookup also work.

Worked example

$1,500 Level 2 charger plus install in your garage, placed in service by June 30, 2026.

• Eligible census tract: $1,500 × 30% = $450 credit
• Ineligible census tract: $0. Doesn’t matter how efficient or new the equipment is

Hard to swallow if your install is on the wrong side of a tract boundary. A charger placed in service after June 30, 2026 gets $0 regardless of tract.

High-Efficiency Electric Home Rebate Program (HEEHRP)

HEEHRP is a state-administered rebate program funded by the IRA, not a tax credit. Up to $14,000 per household.

How it works

• Income-tested:
  • Household income ≤ 80% Area Median Income (AMI): up to 100% of project cost rebated, up to caps
  • Household income 80–150% AMI: 50% rebated, up to caps
  • Household income >150% AMI: not eligible
• Eligible improvements: heat pumps ($8,000 cap), heat pump water heaters ($1,750), heat pump clothes dryers ($840), electric stoves ($840), electrical panel ($4,000), wiring upgrades ($2,500), insulation / air sealing / ventilation ($1,600). All within the $14,000 total.
• Interaction with §25C: a HEEHRP rebate received generally reduces the cost basis used to compute the §25C credit (you take 30% of the cost after the rebate, not before). You can technically claim both, but the §25C credit gets calculated on the post-rebate amount. Treasury guidance is still being clarified; verify with your installer and CPA.
• State rollout has been uneven: most states began disbursing in late 2024 / 2025. Check your state energy office for current status and waitlists.

If you qualify by income, this is potentially much bigger than the §25C tax credit was. With §25C gone for 2026 installs, HEEHRP plus state and utility incentives are what’s left, and for lower-income households they can still cover most of the cost of an electrification project.

State and utility rebates

Don’t skip these. Often the difference between “deal” and “no deal.”

• California SGIP (Self-Generation Incentive Program): batteries, particularly generous for low-income, fire-prone-area, and equity customers
• California NEM 3.0: net metering for solar export (less generous than NEM 2.0, which changes solar economics a lot)
• Massachusetts MassSave: heat pump rebates up to $10,000 state, plus 0% financing in many cases
• NY Clean Heat / NYSERDA: heat pump rebates and contractor network
• Maine Efficiency: heat pump rebates up to $8,000 for low/ moderate income
• Local utility rebates: most utilities offer heat pump, smart thermostat, and weatherization rebates

The best single resource is DSIRE (Database of State Incentives for Renewables and Efficiency, dsireusa.org). Search by ZIP code; it catalogs state, federal, and utility-level incentives.

Stack them: state rebate + utility rebate + (if qualifying) HEEHRP. For 2025 installs, the federal §25D/§25C credits stacked on top.

IRS Form 5695

The form for both §25D and §25C. Filed with your Form 1040 (for 2025 installs, on your 2025 return or an amended return).

Two parts:

• Part I: Residential Clean Energy Credit (§25D: solar, battery, geothermal, etc.)
• Part II: Energy Efficient Home Improvement Credit (§25C: heat pump, insulation, etc.)

The form:

• Computes current-year credit
• Computes any §25D carryforward to next year
• Requires the Manufacturer’s ID (PIN) for §25C-eligible products from 2025 onward

What to keep for audit

• Manufacturer certification statements (the manufacturer attests the product meets the credit’s efficiency requirements)
• Itemized installer invoices breaking out equipment vs. labor
• Receipts for all materials
• Photos of installed equipment with model numbers visible
• Census tract documentation for §30C

Keep these for at least 3 years past the carryforward exhaustion year. For solar with a multi-year carryforward, that means a long time.

Planning the projects

1. Check 2025 installs first. If you completed qualifying work in 2025 and didn’t claim it, file Form 5695 with your 2025 return or amend it.
2. Get the energy audit before new work. It no longer earns a federal credit for 2026 work, but you get a prioritized list of which improvements will pay off on your home.
3. Stack what’s left. State rebate + utility rebate + (if income-eligible) HEEHRP. Each stacking decision is program-specific; check terms.
4. Re-run solar payback without the 30% credit. Pre-OBBBA paybacks of 6–9 years in sunny states (CA, AZ, NM, TX) and 12–15 years elsewhere assumed the §25D credit; a 2026 install without it pays back more slowly.
5. Heat pump payback: highly state-dependent. Wins fastest in the Northeast where you’re displacing oil or propane (often 5–7 year payback). Slower in the South where you’re competing with already-cheap natural gas.

Common mistakes

• Assuming credits apply to rentals. §25D and §25C are personal residence credits. Rental owners fall under the business credit (§48E, itself curtailed for solar and wind by OBBBA).
• Buying used equipment. Not eligible. Must be new.
• Missing the §30C EV charger geographic restriction. Plenty of suburban installs don’t qualify.
• Not stacking with state and utility rebates. You can leave thousands on the table by only chasing the federal credit.
• Forgetting to file Form 5695. No form, no credit. The installer doesn’t do this for you.
• Assuming a 2026 install qualifies. §25C and §25D ended after Dec 31, 2025, and §30C after June 30, 2026, whatever an installer’s older marketing says.
• Throwing away manufacturer documentation. Without the cert statement and PIN, you can’t prove eligibility in audit.
• Forgetting that §25C is non-refundable with no carryforward. Unlike §25D, the §25C credit is use-it-or-lose-it in the year earned.

OBBBA termination dates

The One Big Beautiful Bill Act (signed July 4, 2025) cut the IRA-era schedule short:

• §25D: was 30% through 2032, 26% in 2033, 22% in 2034. Now ends for expenditures made after Dec 31, 2025.
• §25C: was scheduled through 2032. Now ends for property placed in service after Dec 31, 2025.
• §30C: was scheduled through 2032. Now ends for property placed in service after June 30, 2026.
• HEEHRP: a rebate program, not a tax credit; funding through 2031 (or until disbursed). Check your state energy office for status.

Verify current status before committing to a large install.

When to consult a CPA

• Rental property installs, which fall under the business §48E credit (with OBBBA’s solar/wind deadlines) rather than §25D
• Carryforward questions on unused §25D credit from a large pre-2026 solar + battery install
• High income limiting credit utilization (the credits are useless if you have minimal tax liability and no carryforward room)
• Mixed-use property (home office, rented portion): allocation rules
• HEEHRP rebate interaction with §25C basis (still evolving guidance)

Tools you’ll use

• Energy Tax Credits calculator: model a 2025 install across §25D, §25C, and state rebates
• Mortgage Calculator: if financing the install via a HELOC or cash-out refi (note: HELOC interest deductibility depends on substantial improvement; see mortgage interest deduction guide)

Related reading: property tax basics, mortgage interest deduction, homeowners insurance, escrow accounts.