Heat pumps that meet or exceed the CEE highest efficiency tier, not including any advanced tier, in effect at the beginning of the year when the property is installed, and biomass stoves and boilers with a thermal efficiency rating of at least 75% qualify for a credit up to $2,000 per year. Costs may include labor for installation.

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You may claim the energy efficient home improvement credit for improvements to your main home. Your main home is generally where you live most of the time.

The credit is nonrefundable, so you can't get back more on the credit than you owe in taxes. You can't apply any excess credit to future tax years.

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Public utility subsidies for buying or installing clean energy property are subtracted from qualified expenses. This is true whether the subsidy comes directly to you or to a contractor on your behalf. However, utility payments for clean energy you sell back to the grid, such as net metering credits, don't affect your qualified expenses.

File Form 5695, Residential Energy Credits Part II, with your tax return to claim the credit. You must claim the credit for the tax year when the property is installed, not merely purchased.

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The credit has no lifetime dollar limit. You can claim the maximum annual credit every year that you make eligible improvements or install energy efficient property until 2033. However, beginning in 2025, for each item of qualifying property placed in service, no credit will be allowed unless the item was produced by a qualified manufacturer and the taxpayer reports the PIN for the item on their tax return.

IRS Announcement 2024-19 provides taxpayers with specific information on tax treatment of payments from the U.S. Department of Energy’s Home Energy Rebates Program. Please visit the Office of State and Community Energy Programs for additional information on home energy rebates.

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If you make qualified energy-efficient improvements to your home after Jan. 1, 2023, you may qualify for a tax credit up to $3,200. You can claim the credit for improvements made through 2032.

Residential energy property that meets or exceeds the Consortium for Energy Efficiency (CEE) highest efficiency tier, not including any advanced tier, in effect at the beginning of the year when the property is installed qualifies for a credit up to $600 per item. Costs may include labor for installation.

State energy efficiency incentives are generally not subtracted from qualified costs unless they qualify as a rebate or purchase-price adjustment under federal income tax law. Many states label energy efficiency incentives as rebates even though they don't qualify under that definition. Those incentives could be included in your gross income for federal income tax purposes. See Notice 2013-70, IRB 2013-47.

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There are limits on the allowable annual credit and on the amount of credit for certain types of qualified expenses. The credit is allowed for qualifying property placed in service on or after Jan. 1, 2023, and before Jan. 1, 2033.

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To qualify, building envelope components must have an expected lifespan of at least 5 years. Qualified components include new:

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When calculating your credit, you may need to subtract subsidies, rebates, or other financial incentives from your qualified property expenses because they're considered a purchase price adjustment.

We recommend home energy auditors apply for and receive an EIN if they do not already have one. Apply for an EIN online.

To qualify, home improvements must meet energy efficiency standards. They must be new systems and materials, not used. Some improvements have specific credit limits as follows.

Costs of electrical components needed to support residential energy property, including panelboards, sub-panelboards, branch circuits, and feeders, also qualify for the credit if they meet the National Electric Code and have a capacity of 200 amps or more. There is a limit of $600 per item.

In most cases, the home must be your primary residence (where you live the majority of the year). You can't claim the credit if you're a landlord or other property owner who doesn't live in the home.