The federal and many state governments can help you cover the cost of making energy-efficient home improvements.
You can get tax breaks for installing energy-efficient windows, doors and cooling and heating systems, as well as even bigger breaks for installing solar panels and water heaters and making other major changes.
The Inflation Reduction Act significantly increased the benefits of energy-efficient home improvements from 2023 through 2032. Here’s what you need to know about taking advantage of those benefits at tax time.
Energy-Efficient Breaks for Tax Year 2024
In the past, you could get an energy-efficient home improvement tax credit worth 10% of the cost of certain energy-efficient windows, doors and skylights, and 100% of the cost of certain air conditioning and water-heater systems. However, there was a $500 lifetime credit, with lower limits for certain items, such as $200 for windows.
The Inflation Reduction Act expanded these credits starting in 2023. They now cover additional expenses and are worth up to $1,200 annually from 2023 to 2032. A tax credit reduces your tax liability dollar for dollar.
[Read: Tax Credits vs. Tax Deductions]
There are limits for each kind of improvement within the $1,200 annual maximum.
For example, the credit for eligible exterior doors is limited to 30% of costs up to $250 per door, with a total allowance of $500. Exterior windows and skylights are limited to 30% of costs for a total allowance of $600. Insulation materials or systems — and air sealing materials or systems — are limited to 30% of costs.
Qualifying residential energy property is limited to 30% of costs, including labor, with a maximum of $600 for each item, including eligible central air conditioners; natural gas, propane and oil water heaters; natural gas, propane and oil furnaces and hot water boilers.
Eligible heat pumps, biomass stoves and boilers are limited to 30% of costs, including labor, for a maximum yearly credit of $2,000 (this is separate from the $1,200 limit). The energy-efficient home improvement credit no longer has a $500 lifetime limit.
To claim the credit, you must submit IRS Form 5695 with your tax return. For more information, see the the instructions for Form 5695.
[Read: 10 Tax Credits You May Qualify for This Year]
Items Must Meet Certain Standards to Qualify
To qualify for the credit, each of these items must meet certain energy efficiency standards. For example, windows and skylights must have earned the Energy Star “Most Efficient” designation.
See EnergyStar’s Tax Credits for Homeowners resource page for more information and requirement details.
You may also get help finding eligible items through home improvement stores.
For example, you can visit the Lowe’s rebate center, click on “current rebate offers,” then filter the offers for “tax credits” to find items that are eligible for the credit.
You can also view rebates from local energy companies and other ways to save, and enter your ZIP code to identify specific products in your area.
Starting with the 2025 tax year, a Product Identification Number (PIN) needs to be included on the tax return for most of the items eligible for the Energy Efficient Home Improvement credit, with an exception for insulation, says Mark Luscombe, principal analyst with Wolters Kluwer Tax & Accounting. For some property, a Qualified Manufacturer Code (QM Code) may be used, he says.
A Tax Break for Energy Audits Can Help You Plan Your Home Improvements
“The cost of home energy audits can qualify for the credit and may help homeowners know which improvements to make,” says Barbara Weltman, author of “J.K. Lasser’s 1001 Deductions and Tax Breaks 2025.”
Beginning January 1, 2024, the audit must be conducted by a qualified home energy auditor or under the supervision of a qualified home energy auditor who is certified by a qualified Department of Energy certification program, she says.
The home energy audit credit is limited to 30% of the cost with a maximum allowance of $150 and subject to the overall $1,200 limit, Luscombe says.
Larger Credits for Clean Energy
The Residential Clean Energy Credit is worth up to 30% of the cost of some major clean energy systems installed through 2032, such as solar panels, solar water heaters (used for other purposes than heating swimming pools or hot tubs), small wind turbines, battery storage technology and geothermal heat pumps.
The credit is scheduled to fall to 26% of the costs in 2033 and 22% in 2034 — and it expires in 2035.
These items are generally not subject to an overall dollar limit, and the cost of installation often counts toward the credit. However, the credit could also apply to fuel cell property, which does have dollar limits, Luscombe says.
You can find details about the requirements for each item at EnergyStar.
For example, solar water heaters must be certified by the Solar Rating Certification Corporation or a comparable entity endorsed by your state. Geothermal heat pumps must meet the Energy Star program requirements.
Other Ways to Get Tax Breaks for Energy Efficiency
You may be eligible for various other savings opportunities for energy-efficient home improvements and appliances.
“Also, check out tax breaks at the state and local levels,” Weltman says. Type your ZIP code into the Database of State Incentives for Renewables & Efficiency to find out what’s available in your area.
In addition, your local energy company may offer programs that could help you save money on energy-efficient improvements, appliances and other products.
Check your energy company’s website for details. You can also look up rebate programs for your ZIP code by using the Energy Star rebate finder.
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How to Get Valuable Home Energy Tax Credits originally appeared on usnews.com
Update 03/18/25: This story was published at an earlier date and has been updated with new information.
