Energy Efficient Home Improvement Tax Credit: Save Money and Improve Your Home in 2025

Feb 26

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In 2023, the federal government introduced an exciting opportunity for homeowners to save money while enhancing the sustainability of their homes. The Energy Efficient Home Improvement Credit offers a tax break for homeowners who invest in energy-efficient home improvements. If you’re considering upgrading your home, this tax credit can help reduce the cost of energy-efficient materials and improvements.

What is the Energy Efficient Home Improvement Tax Credit?

A home with improvements made — Homes are a large part of an American's wealth. Making Improvements can help not only in value and energy costs, but in tax benefits as well.

Per the IRS, the Energy Efficient Home Improvement Credit allows homeowners to make qualifying upgrades to their homes and reduce their federal tax burden. This credit helps homeowners offset costs related to making their homes more energy-efficient, which can include upgrades to doors, windows, insulation, water heaters, and more. Starting in 2023, this credit makes sustainable home improvements more affordable.

How to Qualify for the Energy Efficient Home Improvement Credit

To qualify for the Energy Efficient Home Improvement Credit, your home must meet certain criteria:

Location: Your home must be located within the United States.
Type of Home: The property must be an existing home.
Primary Residence: In most cases, the home must be your primary residence. Landlords of residential property do not qualify for this credit.

What Qualifies for This Tax Credit?

This tax credit mostly only covers the costs of purchasing materials for energy-efficient improvements. The total credit is 30% of the costs of these materials and improvements. Here are some of the materials that qualify:

Exterior Doors

Must meet Energy Star requirements.
Credit of up to $250 per door, with a maximum of $500.

Exterior Windows and Skylights

Must meet Energy Star Most Efficient certification.
Maximum credit of $600 for all windows and skylights.

Insulation and Air Sealing Materials

Must meet the International Energy Conservation Code (IECC) standards that were in effect at least 2 years before claiming the credit.
No stated maximum for materials, but the total credit is capped at $1,200 for insulation and air sealing.

Home Energy Audits

Includes a written report from a certified home energy auditor.
Maximum credit of $150 for the energy audit.

Energy Efficient Appliances (e.g., Natural Gas/Propane/Oil Water Heaters, Furnaces, and Central Air)

Must meet or exceed the Consortium for Energy Efficiency (CEE) highest efficiency tier.
Credit of $600 per item installed, including labor costs.

Heat Pumps and Biomass Stoves

Electric or natural gas heat pumps, heat pump water heaters, biomass stoves and boilers. Must meet same efficiency standard as energy efficient appliances above.
Credit of up to $2,000 for these materials and installations.

Maximize Your Tax Credit: What’s Covered and How Much Can You Save?

The maximum tax credit you can claim per year is $3,200. Here’s how the credit breaks down:

$1,200 for improvements like windows, doors, energy audits, insulation, natural gas water heaters or furnaces, and central air conditioners.
$2,000 for high-efficiency electric water heaters, heat pumps, and biomass stoves.

How the Energy Efficient Home Improvement Credit Can Help You Save Money

Imagine you’re planning a major home improvement project—replacing insulation, installing new energy-efficient windows, and upgrading your exterior door. Let’s break down how you can benefit from the Energy Efficient Home Improvement Credit.

For example, you decide to replace old insulation with high-efficiency insulation, install energy-certified windows, and upgrade your exterior door. You also replace your old water heater with an electric energy-efficient model. After applying the tax credit, your out-of-pocket costs for these improvements might be significantly reduced. Here’s how:

Breakdown of costs and the tax credit allowed for the improvements made for energy efficient home improvements. — The breakdown of costs and tax credits allowed for potential improvements of a home from the above example

These upgrades will not only save you money upfront but also help lower your long-term energy costs.

Ready to Make Your Home More Energy Efficient?

Contact our professionals today to see if your home improvements qualify for the Energy Efficient Home Improvement Credit. Start saving money on your taxes and invest in sustainable upgrades for your home. With reduced energy costs and a lower tax burden, there’s never been a better time to make your home more energy-efficient.

Energy Efficient Home Improvements