Current tax law allows homeowners to claim up to $3,200 per year in tax credits for energy-efficient home improvements. But these incentives may soon vanish.
Pending tax legislation in Congress could eliminate these benefits for improvements placed in service after December 31, 2025.
What’s Available?
There are two key credits to know about.
- Up to $1,200/year for energy improvements to your primary residence, including:
- Exterior doors (up to $500 total)
- Windows and skylights (up to $600)
- Insulation and air sealing materials
- Energy-efficient furnaces, boilers, water heaters, air conditioners, and electric panels
- Up to $2,000/year for advanced systems installed in either your main or second home:
- Electric or natural gas heat pumps
- Electric or natural gas heat pump water heaters
- Biomass stoves and boilers
Additionally, a $150 credit is available for a certified home energy audit, which helps you identify the most cost-effective upgrades.
Important Details
These are non-refundable annual credits, so they reduce your tax bill—but don’t result in a refund.
There’s no lifetime limit, meaning you can claim the credit again each year if you continue to make qualifying improvements (assuming the law remains in effect).
Improvements must meet specific energy-efficiency standards and be installed (not just purchased) by the deadline.
You must subtract subsidies or rebates (such as those from utilities) from the cost basis used to calculate your credit.
Take Action Now
If you’ve been considering upgrades such as insulation, new windows, or high-efficiency heating systems, now may be your last chance to take full advantage of these credits. Given the looming legislative changes, we recommend planning and scheduling any eligible improvements as soon as possible.
If you would like to discuss the tax implications of home improvements, please get in touch with us at hello@agfintax.com.
