The Energy Efficient Home Improvement Credit helps homeowners claim a tax credit for certain energy-saving improvements made to an existing home. The credit is claimed on Form 5695.
Important: The One Big Beautiful Bill Act ended the Energy Efficient Home Improvement Credit for property placed in service after December 31, 2025. Taxpayers may still claim the credit for eligible improvements placed in service on or before that date if all requirements are met.
Which Homes Qualify for the Credit?
The credit was available for qualifying improvements made to:
- Your primary residence
- A second home used as a residence by you
The credit was not available for:
- Rental properties that were not used as your residence
- Newly constructed homes
- Improvements made to a home not used as a residence by the taxpayer
The credit applied only to qualifying expenses for an existing home, including eligible additions or renovations to an existing home.
Business Use of the Home
If the property was used exclusively for business purposes, it did not qualify for the credit.
If business use was:
- 20% or less: You could generally claim the full credit.
- More than 20%: You had to allocate expenses between business and personal use and calculate the credit based only on the personal-use portion.
What Home Improvements Were Eligible?
Building Envelope Components
The following qualifying improvements were eligible for a credit equal to 30% of qualified costs:
- Exterior doors: up to $250 per door, with a maximum credit of $500
- Exterior windows and skylights: up to $600
- Insulation materials or systems
- Air sealing materials or systems
Home Energy Audits
- Credit equal to 30% of costs
- Maximum credit of $150
Residential Energy Property
The following items qualified for a credit equal to 30% of costs, including eligible labor costs, subject to a maximum credit of $600 per item:
- Central air conditioners
- Natural gas, propane, or oil water heaters
- Natural gas, propane, or oil furnaces
- Hot water boilers
- Electrical panelboards, sub-panelboards, branch circuits, or feeders installed in connection with qualifying energy property
Heat Pumps and Biomass Equipment
The following items qualified for a credit equal to 30% of costs, including eligible labor costs:
- Electric heat pump water heaters
- Natural gas heat pump water heaters
- Electric heat pumps
- Natural gas heat pumps
- Biomass stoves
- Biomass boilers
Energy Efficiency Requirements
Qualifying property had to meet specific efficiency standards.
Doors, Windows, and Skylights
Exterior doors, windows, and skylights must meet applicable ENERGY STAR® requirements.
Insulation and Air Sealing Materials
Insulation materials, systems, and air sealing products must meet the applicable standards established by the International Energy Conservation Code (IECC) in effect for the required period.
Heating and Cooling Equipment
The following equipment generally had to meet or exceed the highest efficiency tier established by the Consortium for Energy Efficiency (CEE) in effect at the beginning of the year the property was placed in service:
- Heat pumps
- Heat pump water heaters
- Central air conditioners
- Natural gas, propane, or oil water heaters
- Natural gas, propane, or oil furnaces
- Hot water boilers
Oil Furnaces and Hot Water Boilers
These items could also qualify if they:
- Met or exceeded 2021 ENERGY STAR efficiency standards and were rated for fuel blends containing at least 20% eligible fuel, or
- If placed in service after December 31, 2026, met specific efficiency and fuel-blend requirements established by law
Biomass Stoves and Boilers
Biomass stoves and biomass boilers must have a thermal efficiency rating of at least 75%.
Electrical Panels and Related Equipment
Panelboards, sub-panelboards, branch circuits, and feeders must:
- Be installed according to the National Electrical Code (NEC)
- Have a load capacity of at least 200 amps
Used Property
Previously used property did not qualify for the credit.
Can I Include Labor Costs?
You may include labor costs associated with onsite preparation, assembly, and original installation for qualifying residential energy property, including:
- Central air conditioners
- Water heaters
- Furnaces
- Hot water boilers
- Heat pumps
- Heat pump water heaters
- Biomass stoves
- Biomass boilers
- Electrical panel and circuit upgrades that qualify
You may not include labor costs for building envelope components, such as:
- Insulation materials or systems
- Air sealing systems
- Exterior windows
- Skylights
- Exterior doors
If you paid a single contract price that included both materials and installation, a reasonable allocation must be made between qualifying material costs and nonqualifying labor costs.
What Was the Maximum Credit Available?
The Energy Efficient Home Improvement Credit had two separate annual limits.
Standard Annual Limit
The combined annual limit for:
- Building envelope components
- Home energy audits
- Residential energy property
was $1,200 per year.
Heat Pump and Biomass Equipment Limit
A separate annual limit of $2,000 applied to:
- Heat pump water heaters
- Heat pumps
- Biomass stoves
- Biomass boilers
Maximum Annual Credit
The maximum total credit that could be claimed in a year was $3,200.
Additional rules:
- Limits were determined annually.
- Unused credit could not be carried forward.
- The credit was nonrefundable, meaning it could reduce your tax liability to zero but could not create a refund by itself.
- The credit was claimed in the year the qualifying property was placed in service.
Product Identification Number (PIN) Requirement
For qualifying property subject to the reporting requirements, each item must be produced by a qualified manufacturer and include a Product Identification Number (PIN) that is reported on the tax return.
Be sure to keep all receipts, invoices, manufacturer certifications, and product identification information with your tax records.
Program Entry
To enter the Energy Efficient Home Improvement Credit in the software:
Federal Section
- Select Deductions
- Select My Forms
- Select Credits
- Select Residential Energy Credit (Form 5695)
- Enter your information under Qualified Energy Efficiency Improvements