Energy Efficient Home Improvement Credit | IRS (Tax Year 2025)

Status Update (February 2026)

IRS currently states this credit applies to qualifying property placed in service from 2023 through December 31, 2025.

For 2025 placements, IRS continues to list:

30% credit rate,
annual $1,200 cap for many categories (with category sub-limits),
separate annual $2,000 cap for qualifying heat pumps, heat pump water heaters, and certain biomass equipment,
2025 QMID reporting requirement for qualifying property.

IRS 2025 Form 5695 instructions also include explicit termination language for property placed in service after December 31, 2025.

What This Credit Covers

This credit applies to eligible efficiency improvements to an existing U.S. home used as your primary residence. It generally includes categories like building-envelope upgrades, specified residential energy property, and home energy audits.

It is nonrefundable, and IRS guidance states excess amounts are not carried forward for this credit.

Annual Cap Structure (Practical View)

Standard annual bucket: up to $1,200 for many improvements (with sub-limits, such as windows/doors/audit limits).
Separate annual bucket: up to $2,000 for certain heat-pump/biomass categories.

Project sequencing matters. If you stack all projects in one year, you may leave potential credits unused.

2025 QMID Requirement

IRS guidance states that for 2025 placements, no credit is allowed for an item unless it is produced by a qualified manufacturer and the taxpayer reports the Qualified Manufacturer Identification Number (QMID) on the return.

Do not wait until filing season to gather these details.

Home-Type and Installation Scope Rules

IRS guidance frames this credit around improvements to an existing home used as your primary residence in the United States. Planning errors often happen when taxpayers mix qualifying primary-residence items with nonqualifying uses or assume new-construction items fit the same rules.

Review item eligibility at the component level before installation, and keep product documentation that maps directly to IRS criteria. This reduces disputes over whether a claimed item fits qualifying property definitions.

How to Claim

Confirm each installed item meets IRS qualification criteria.
Gather invoices, installation dates, product documentation, and QMID details where required.
Complete Form 5695 (Part II) accurately.
Reconcile costs with rebates and other incentives.
File by applicable deadline (generally April 15, 2026 for tax year 2025 returns).

Common Mistakes

Claiming nonqualifying products or labor categories.
Missing annual sub-limit calculations.
Filing without QMID data for 2025 items.
Assuming this credit is refundable.
Using outdated pre-2023 rules.

Planning Tips

Stage multi-year projects to optimize annual caps.
Keep item-level records instead of one lump sum spreadsheet.
Ask contractors for manufacturer documentation during installation, not later.
Store receipts, model numbers, and filing worksheets together.

2026 Filing Scope Reminder

For returns filed in 2026, this credit generally applies only to qualifying items placed in service during 2025 (and earlier eligible years not yet claimed correctly). Do not assume a 2026 installation qualifies under current IRS guidance.

Audit-Readiness Tip

For each claimed item, keep one line-item file containing install date, installer invoice, qualifying product details, and QMID information where required. If IRS correspondence arrives, this structure allows fast response and avoids rebuilding proof from mixed receipts and contractor emails months later.

Official Sources

IRS credit page: https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit
Form 5695: https://www.irs.gov/forms-pubs/about-form-5695
Instructions for Form 5695 (2025): https://www.irs.gov/instructions/i5695
IRS filing deadlines: https://www.irs.gov/filing/individuals/when-to-file