Homeowners now have access to a range of tax credits and incentives to improve energy efficiency, reduce costs, and support a sustainable future. Thanks to the Inflation Reduction Act, you can upgrade your HVAC systems, improve insulation, and make other eco-friendly home improvements while benefiting from significant savings.
Inflation Reduction Act (IRA) Tax Credits for Energy Efficiency
The Inflation Reduction Act provides tax credits to homeowners who make energy-efficient upgrades. These credits cover various home improvements, including HVAC system upgrades, insulation, and energy-efficient windows and doors.
Qualifying Upgrades: The Inflation Reduction Act expanded and renamed the 25C tax credit, known as the Energy Efficient Home Improvement Tax Credit, to offer higher incentives and annual (not lifetime) limits to eligible homeowners with qualifying equipment installed January 1st, 2023 through December 31st, 2032.
Credit Amounts:
Equipment TypeMax Annual Credit (2023–2032)
Heat pumps $2,000
Heat pump water heaters $2,000
All other energy-efficient improvements (combined)$1,200 total
— Central air conditioners Up to $600
— Furnaces or boilers Up to $600
— Insulation, windows, doors, electrical panels, etc. Shared in $1,200 cap
Home energy audits $150 (separate from $1,200 cap)
2. Get documentation from your contractor (AHRI certificate, invoice).
3. File IRS Form 5695 when you do your taxes.
4. Claim the Nonbusiness Energy Property Credit on your federal return.
Who Qualifies For Tax Credits?
Homeowners only (not renters)
• Must be for your primary residence
• Must file federal income tax and have tax liability
• Property must be in the United States
Energy Efficient Home Improvement Credit (Section 25C)
This credit provides homeowners with up to 30% of the cost for energy-efficient improvements, including HVAC systems, water heaters, and home insulation.
Eligible Items: The following energy-efficient home improvements are eligible for the credit:
High-efficiency HVAC systems, including air conditioners, furnaces, and heat pumps.
Energy-efficient water heaters.
Home insulation upgrades, including weather stripping and sealing.
Energy-efficient exterior windows and doors.
Advanced main air circulating fans.
Credit Limits:
Overall Annual Limit: Up to $1,200 per year.
HVAC-Specific Limit: Up to $600 for qualified air conditioners and furnaces.
Heat Pump and Water Heater Limit: Up to $2,000 annually for qualified electric heat pumps, heat pump water heaters, and biomass stoves or boilers.
Other Improvements: Up to $250 for any exterior door (maximum of $500 for all exterior doors) and up to $600 for exterior windows and skylights.
