IRA Home Energy Tax Credits: What Ended, What Survives, and What You Can Still Quote
Why this reference exists
The Inflation Reduction Act of 2022 created the largest set of residential energy tax credits and rebates in U.S. history, and most of them no longer exist.
Status as of 2026: the federal residential energy tax credits are gone. The 2025 reconciliation act (P.L. 119-21) terminated 25C for property placed in service after December 31, 2025 and 25D for expenditures made after December 31, 2025, well short of the 2032 sunset the IRA had set. The 30C charger credit and the 45L new-home credit ran to June 30, 2026. Do NOT quote any of these on current work. What survives is the state-administered side: the DOE Home Energy Rebates (HEEHRA and HOMES) were appropriations to states rather than tax credits and were not terminated, and state and utility incentive programs continue independently. This reference is kept for work placed in service inside the eligible window, which customers may still be documenting or defending on audit.
The rest of this reference describes the credits as they operated, because the paperwork obligations outlive the credit: a customer who claimed in 2024 or 2025 and gets audited in 2027 will call your shop for the AHRI certificate.
Two distinct programs
Section 25C: Energy Efficient Home Improvement Credit (tax credit)
- Filed on IRS Form 5695 with the homeowner's federal tax return
- Applied to tax owed (non-refundable but no income limit)
- Equipment must meet specific efficiency standards
Section 25D: Residential Clean Energy Credit (tax credit)
- Solar + battery + geothermal + small wind
- 30% of cost, NO cap, for expenditures through December 31, 2025 only
- Applied to tax owed (non-refundable but rolls forward indefinitely)
- No annual or lifetime cap while it ran. The 26% and 22% step-downs the IRA scheduled for 2033 and 2034 never take effect, because the credit was terminated first
High-Efficiency Electric Home Rebate Act (HEEHRA) (point-of-sale rebate)
- Administered by states; rollout 2024-2025 (varies by state)
- INCOME-LIMITED (under 80% AMI = max rebate; 80-150% AMI = 50% rebate)
- Applied at purchase, not at tax time
- Stackable with 25C credit
25C credit (Energy Efficient Home Improvement)
25C is structured as two separate annual buckets, each with its own cap, and the caps are stated in the statute as dollar figures. Look up the current figures on the IRS page for the credit before you put any number in front of a customer; they have moved, and the credit's availability has an end date.
Envelope-related: insulation and air sealing, exterior doors, windows and skylights, and the home energy audit. The credit is a percentage of cost, subject to an overall annual cap for this bucket, with tighter sub-caps on windows and on doors (and a per-door limit inside the door sub-cap). The audit has its own small cap. Because the cap is annual rather than lifetime, a customer doing a large retrofit can split the work across two tax years and claim the cap twice. That is a legitimate scheduling conversation to have at the estimate.
Heat-pump portion: air-source heat pumps, heat pump water heaters, and biomass stoves and boilers sit in their own annual bucket with its own cap, separate from and stackable with the envelope bucket in the same year. Same percentage-of-cost structure, same annual reset. This is why a heat pump plus an insulation package in the same year can claim against both caps rather than one.
Two things to say to every customer, in writing, on the proposal: the credit is non-refundable, so it only helps to the extent they owe tax, and you are not their tax advisor. Give them the equipment ratings and the manufacturer's certification statement, and let their preparer handle the return.
25C equipment efficiency requirements
The credit only applies to equipment meeting these federal standards. Verify before quoting:
- Air-source heat pump (split or packaged): SEER2 ≥ 16, EER2 ≥ 12, HSPF2 ≥ 9 (different criteria for North vs South climate regions; verify ENERGY STAR Most Efficient list)
- Heat pump water heater: UEF ≥ 3.3
- Biomass stove: 75% efficiency rating + ENERGY STAR
Equipment without these ratings doesn't qualify. Quoting "this qualifies for the credit" without verifying the ratings can result in IRS denial + customer fury.
25D credit (Residential Clean Energy)
Solar:
- Solar photovoltaic (PV): 30% of total system cost, no cap
- Solar water heating: 30%, no cap
- Includes panels, inverters, racking, labor, permits
Battery storage (added 2023):
- 3 kWh+ battery storage: 30%, no cap
- Can be paired with solar OR standalone (any battery, even charging from grid, qualifies)
Geothermal:
- Geothermal heat pumps: 30% of cost, no cap, on the same 25D terms as solar
- The unit had to meet the ENERGY STAR requirements in effect at the time of purchase, so the qualifying threshold is dated to the purchase, not to the install
- Qualifying cost includes the ground loop, the drilling or trenching, the interior equipment, and labor, which is why geothermal was the highest-value 25D claim per job on most residential work
Small wind + fuel cells: carried the same 30% credit under 25D and ended on the same date, more obscure for residential.
HEEHRA rebates (state-administered)
NOT a tax credit. Direct rebate at time of purchase. State agencies designed rollout in 2024-2025. The statute sets the eligible categories, and states administer within them:
- Heat pump for space heating and cooling
- Heat pump water heater
- Electric stove, cooktop, range, or oven
- Heat pump clothes dryer
- Electrical panel upgrade
- Electrical wiring
- Insulation, air sealing, and ventilation
Each category carries its own maximum, with an overall per-household maximum across all of them, and every figure is set by the state program. Pull the numbers off the state portal on the day you quote.
Income limits:
- Under 80% of Area Median Income: 100% of rebate
- 80-150% AMI: 50% of rebate
State portal applies eligibility check; customer either qualifies + sees discount at quote OR doesn't. Verify with state portal before quoting. State programs include: NY-NYSERDA, MA-MassSave (separate state program), CA various, NJ ClimateCorps, IL, OR, WA, ME, NM, MI early adopters.
How customer claims the credits
25C + 25D (tax credits):
- Customer keeps invoice + manufacturer certification statement
- File IRS Form 5695 with annual tax return
- Credit reduces federal tax owed
- Both credits are non-refundable, so a customer with little or no federal tax liability gets little or no benefit regardless of what they spent
- 25D carries forward indefinitely; 25C does NOT carry forward (use it or lose it in the tax year)
HEEHRA rebate:
- Customer eligibility verified at state portal
- Rebate applied as discount on purchase (paperwork by installer in most states)
- No tax filing required
- Income verified at sign-up
Installer paperwork required
For 25C-claimable installs, the customer needs:
- Itemized invoice clearly identifying the qualifying equipment
- AHRI certificate (HVAC) or ENERGY STAR certificate
- Manufacturer model + serial numbers
- Installation address + date
- Statement of compliance with applicable efficiency standards
Best practice: deliver this as a single PDF "tax credit documentation package" with the final invoice. Customer's CPA loves you.
How the incentives stacked, in structure
Work the stacking as an order of operations rather than as remembered figures. The numbers change; the order does not.
Cold-climate heat pump retrofit. The state rebate comes off the price at the counter, so it reduces what the customer finances. The tax credit is claimed later against the REDUCED cost, not the sticker, because you cannot claim a credit on money a rebate already paid. A household under 80% AMI could see the rebate cover the whole eligible equipment category and be left with little basis for a credit at all; a household over 150% AMI got no rebate and claimed against the full cost. Same job, two completely different net paths, and the only variable is income.
Solar plus battery. Both sat under 25D at the same rate with no cap, so the two stacked cleanly and the labor, racking, permits, and inverter all counted in the basis. A battery of 3 kWh or more qualified whether it was paired with the array or standing alone.
Heat pump plus envelope in the same year. This is the one worth understanding, because 25C's caps were per-bucket and annual. The heat pump claimed against the heat-pump bucket, the insulation and air sealing claimed against the envelope bucket, and the two did not compete. Splitting a large retrofit across two tax years claimed each annual cap twice. Both moves were legitimate scheduling conversations at the estimate, and both are the kind of thing a customer only learns from a contractor who reads the program.
Common pitfalls
- Quoting credits without verifying equipment efficiency: customer denied by IRS, blames installer
- No AHRI certificate: critical for HVAC; without it, no credit
- Customer's tax liability too low to use 25C in one year: non-refundable, evaporates
- Multiple installations same year exceed annual cap: stagger to next year
- Income limits not checked for HEEHRA: customer expecting rebate doesn't get it
- State rebate program not yet launched: check status; many programs delayed
- "Repair" doesn't qualify: only NEW equipment or substantial improvement
Federal credit timeline (actual)
- 2023 through 2025: 25C and 25D active. A customer could claim 25C in each of those years, capped annually per category
- December 31, 2025: 25C and 25D both terminate under P.L. 119-21
- June 30, 2026: 30C (charger) and 45L (new home) terminate
- 2033 and 2034: the 26% and 22% step-downs the IRA scheduled never occur
HEEHRA and HOMES are state-administered rebate programs funded by appropriation, not tax credits, and are unaffected by the termination. Check your state's program status; that is the incentive you can still put on a quote.
Quote only incentives that still exist, and name the program. Since the federal credits ended, that means the state or utility rebate: "this system is X, your state rebate takes Y off, so your out-of-pocket is Z." Leading with a net-after-incentive number is still the right move on close rate, but a rep who quotes a dead federal credit creates a customer who finds out at tax time and blames the shop. Verify the program is live in that state before it goes on the quote.
References
- IRS Publication 5798 (Energy Efficient Home Improvement Credit Q+A)
- IRS Form 5695 + instructions
- DOE Home Energy Rebates (HEEHRA + HOMES) portal
- ENERGY STAR Most Efficient + Qualified Product Lists
- NEEP Cold Climate ASHP Product List
- Manuall internal: Heat Pump Sizing for Cold Climate Reference, Electrical Panel Upgrades for Electrification Reference