Energy-Efficient Home Improvement Credit 2026 — The 25C Credit Has Ended

The Section 25C Energy Efficient Home Improvement Credit no longer applies to improvements made in 2026. This credit used to give homeowners back 30% of the cost of insulation, windows, doors, heat pumps, and similar upgrades, up to $3,200 per year. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, repealed the credit for property placed in service after December 31, 2025 — about seven years ahead of its original 2032 end date. If you’re planning home energy upgrades in 2026, do not budget for this credit.

What Changed

If You Made Improvements Before January 1, 2026

If your qualifying improvement was placed in service on or before December 31, 2025, you can still claim the credit on your 2025 federal return (filed in early 2026), under the historical rules:

• 30% of the qualifying cost, subject to the category caps that applied through 2025: $1,200 combined for insulation, exterior doors, windows/skylights, and home energy audits; $2,000 combined for heat pumps, heat pump water heaters, and biomass stoves/boilers; $3,200 total per year.
• File Form 5695, Part II, with your 2025 return. The credit is non-refundable and — as before — cannot be carried forward, so any unused amount from your 2025 claim is lost.
• Keep your manufacturer certifications and proof of the placed-in-service date. The IRS can still request documentation for a 2025 claim even though the credit no longer exists going forward.

Why the Credit Ended

Section 25C was created by the Inflation Reduction Act of 2022, replacing an older, smaller lifetime-cap version of the same credit with an annual $3,200 limit intended to run through 2032. The One Big Beautiful Bill Act, signed July 4, 2025, repealed the credit for property placed in service after December 31, 2025 as part of a broader rollback of individual clean-energy incentives — the same legislation that also ended the federal EV tax credit (for vehicles acquired after September 30, 2025) and the residential solar credit, Section 25D (for property placed in service after December 31, 2025).

What’s Still Available for 2026 Home Improvements

Rethinking Home Energy Upgrades for 2026

Before the repeal, a $3,500 insulation job or an $8,000 heat pump installation came with a built-in 30% federal discount — up to $1,050 and $2,000 respectively. Without that credit, plan your 2026 budget around the full, uncredited price:

1. Get current quotes and confirm with the contractor or manufacturer whether any state or utility rebate still applies — federal repeal does not affect state programs.
2. Don’t assume “Energy Star certified” still means a federal credit applies. Certification requirements for state programs may differ from the old federal ones.
3. Time major purchases around your budget, not a tax credit, since the deduction that used to offset upfront cost no longer exists for new installations.
4. Track the expense for your cost basis anyway. Capital improvements to your home still increase your basis and reduce taxable gain when you eventually sell — see tax deductions for homeowners.

Related Resources

• Solar Tax Credit 2026 — the companion 25D credit also ended after 2025
• EV Tax Credit Guide 2026 — ended on a similar timeline under OBBBA
• Tax Deductions for Homeowners — full list of what’s still available
• Schedule A — itemized deductions unaffected by this change

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.