Homeowners have until December 31 to take advantage of the 25C Energy Efficient Home Improvement Tax Credit, which rewards energy-saving upgrades with valuable federal tax savings. From high-efficiency heat pumps to smart thermostats, qualifying improvements can earn you up to $2,000 back—but only if the work is completed by year’s end.
The 25C tax credit, officially called the Energy Efficient Home Improvement Tax Credit, was created to help homeowners reduce their energy use and costs by upgrading to higher-efficiency systems. Expanded through the Inflation Reduction Act, this incentive allows you to claim a percentage of qualifying home improvement expenses on your federal taxes.
Unlike short-term rebate programs, the 25C tax credit is available through 2032 and applies to the year your project is completed. That means if you want to claim it for your 2025 taxes, your new system must be installed before December 31, 2025.
Here’s a quick overview of how it works:
Put simply, the 25C tax credit gives homeowners a financial reason to prioritize energy efficiency, but timing and equipment eligibility are key.
One of the most attractive aspects of this program is its flexibility. The 25C tax credit allows you to claim up to $3,200 per year, depending on the upgrades you complete. However, the amount you can save varies based on the equipment type and how much energy efficiency it delivers.
Let’s break down the savings.
High-efficiency heat pumps and central air conditioners can qualify for up to $2,000 in tax credits when they meet ENERGY STAR® certification standards. Because these systems provide both heating and cooling, they’re often the most impactful upgrade for reducing year-round energy costs.
Qualifying furnaces, boilers, and similar systems can earn you up to $600 in credits when installed to meet or exceed the required efficiency ratings. If your system is nearing the end of its lifespan, this credit can help make replacement far more affordable.
A professional home energy audit may also qualify for a $150 tax credit, helping you identify which improvements will yield the best energy savings. Combined with other home energy tax credits, homeowners can save up to 30% on eligible projects, up to $3,200 total each year.
To receive the 25C tax credit, your system must meet certain efficiency standards and be installed by a qualified contractor. For HVAC systems, that typically includes:
If you’re not sure whether your preferred model qualifies, a professional can help you select eligible systems and provide documentation needed for your tax claim.
Arnold Air & More helps homeowners select and install ENERGY STAR®-rated systems designed for maximum efficiency and long-term savings. If you’re ready to replace your aging HVAC system, discover how our professional installations can help.
The process for claiming your 25C tax credit isn’t complicated, but it does require attention to detail and good recordkeeping. Since the credit applies to the year your qualifying improvements are installed, you’ll want to make sure every step is handled correctly.
Here’s how to make it happen:
Start by ensuring that both your home and equipment meet the program’s basic requirements. The 25C tax credit only applies to primary residences in the United States, not rental properties or new construction. Your new HVAC system, water heater, or other energy-efficient improvement must meet current ENERGY STAR® efficiency standards.
A qualified HVAC contractor can help you verify that the equipment you’re considering is eligible under federal guidelines and that your installation timeline will fall within the current tax year.
Once your installation is complete, it’s time to gather and store the paperwork you’ll need when filing your taxes. This includes:
Keep these documents with your tax records for at least three years. The IRS may request proof to confirm your eligibility for home energy tax credits, and having this information ready will make the process seamless.
When tax season arrives, you’ll officially claim your credit by filing IRS Form 5695: Residential Energy Credits along with your standard tax return. This form walks you through the calculation process and allows you to apply the credit directly toward your total tax liability.
If you’re not comfortable filing on your own, your tax preparer or accountant can help ensure the form is completed accurately and that you claim the maximum amount possible. They’ll also help verify that your installation meets the timing and documentation rules set by the IRS.
Time is running out to claim your 25C tax credit for 2025. The credit only applies to systems installed and operational before December 31, not just purchased. That means scheduling installation now is critical to ensure you qualify for this year’s benefit.
Here’s why waiting could cost you:
By planning your project before the year ends, you’ll improve comfort and efficiency, as well as lock in a valuable tax benefit that won’t wait.
Arnold Air and More helps homeowners identify eligible HVAC upgrades, select ENERGY STAR® systems that meet 25C tax credit requirements, and complete installations before time runs out. Our certified technicians ensure your project qualifies, runs efficiently, and delivers comfort that lasts long after tax season.
Contact Arnold Air and More today to discuss your home’s best energy-efficient upgrade options.
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