Home energy tax credits: what ended and what is left

By Tom, CPA · Updated October 27, 2026

Part of: Easy Tax Strategies

TL;DR: The 2025 tax law ended the two main homeowner energy credits early. The Energy Efficient Home Improvement Credit (25C) does not apply to property placed in service after December 31, 2025, and the Residential Clean Energy Credit (25D) does not apply to expenditures made after that date. 2025 projects can still be claimed on 2025 returns, including by amendment, and state and utility rebates continue separately.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

For a few glorious years, the tax code practically begged you to buy a heat pump. Then the One Big Beautiful Bill Act of July 2025 turned off the faucet, years ahead of the original schedule. If you are planning a home energy project now, the federal tax credit is probably not part of the math anymore. If you finished one in 2025, there may still be money to claim.

This page summarizes the status as of October 27, 2026, from IRS fact sheets and FAQs on the 2025 law. Part of easy tax strategies. Rental owners should see energy credits for rentals.

CPA Warning Label: The timing rules differ between the two credits; claiming a 2026 installation based on a 2025 deposit or contract can be disallowed.

What ended and when

So for a homeowner doing a project in late 2026, none of these federal credits is available.

Placed-in-service rules

The two main credits used different timing tests, and that matters for projects straddling the year-end:

• 25C (improvements): the test was when property was placed in service, meaning installed and ready for use. A furnace bought in December 2025 but installed in January 2026 did not qualify.
• 25D (clean energy): the test was when the expenditure was made, which IRS FAQs treat as when installation is completed. Paying a deposit in 2025 for solar installed in 2026 generally did not secure the credit.

If your installer finished in 2025, keep proof of the completion date, such as the final inspection, permission-to-operate letter from the utility, or completion invoice.

Here is the year-end straddle in plain numbers. Picture two neighbors who each spent $12,000 on a qualifying heat pump. Neighbor A had it installed and running on December 18, 2025; that is a 2025 placed-in-service date, so 30% of $12,000 is $3,600, capped at $2,000, and the credit goes on the 2025 Form 5695. Neighbor B paid in full on December 18, 2025, but the crew showed up on January 6, 2026. Same equipment, same receipt, same smug thermostat: zero federal credit, because 25C cares about when the thing was placed in service, not when the card was swiped. If you are unsure which side of the line you landed on, the installer's dated completion paperwork and any city permit sign-off are your best evidence. Check those dates before you file or amend, not after a notice arrives, and keep them with the return rather than in the junk drawer next to the warranty card.

Claiming a 2025 project

Illustration: Frugal Fran replaced her old furnace with a qualifying heat pump in October 2025 for $9,000 and added $1,500 of qualifying insulation. Her 25C credit on her 2025 return:

• Heat pump: 30% × $9,000 = $2,700, capped at $2,000.
• Insulation: 30% × $1,500 = $450, within the $1,200 annual cap for other items.
• Total credit: $2,450, on Form 5695.

If she forgot to claim it when filing in early 2026, she can file an amended 2025 return, generally within three years of the original filing. A 25D solar credit that exceeds tax could carry forward to later years, so people with large 2025 solar installations may still be using up carryforwards on 2026 and later returns. Lavish Larry, meanwhile, signed a contract for a solar array in November 2025 that was installed in February 2026, and is now learning the difference between "signed" and "spent."

What's left

• Carryforwards of unused 25D credits from 2025 and earlier.
• Amended returns for missed 2023 to 2025 credits within the statute of limitations.
• Energy savings themselves. A project with a good payback still pays back; it just lost its federal subsidy.
• Business and rental property rules, which differ; see energy credits for rentals.
• Education and other credits that remain; see education credits and the forgotten credits checklist.

State/utility rebates

Federal tax credits ended; many other incentives did not. Check:

• State energy office programs, including state-run rebate programs funded under earlier federal laws, where they are still operating.
• Utility rebates for heat pumps, smart thermostats, insulation and efficient appliances.
• State tax credits for solar or efficiency, in states that offer them.
• Property tax exemptions for solar in some states, which keep the added home value from increasing your assessment; see lowering property taxes.

Tax treatment of rebates: utility rebates for energy conservation measures are often excluded from income but reduce your cost basis. Programs differ, so check the program's guidance.

Records

Keep these for any 2025 claim, and for basis records on any energy improvement:

1. Itemized invoices separating equipment and labor.
2. Manufacturer certification statements or product qualification documentation.
3. For 2025 25C claims, the qualified manufacturer product identification number where required.
4. Proof of placed-in-service or completion date.
5. Rebate award letters, since rebates may reduce the credit-eligible cost and basis.
6. Copies of Form 5695 and any carryforward computation.

Keep them at least three years after filing the return claiming the credit, and longer for basis records, which matter when you sell the home.

Timeline at a glance

• July 4, 2025: the One Big Beautiful Bill Act is signed, accelerating credit end dates.
• September 30, 2025: last day to acquire a vehicle for the clean vehicle credits; see EV credit status.
• December 31, 2025: last day to place 25C improvements in service and to complete 25D installations.
• June 30, 2026: last day to place home EV chargers (30C) in service.
• 2026 and later: only carryforwards, amended returns and non-federal incentives remain for homeowners.

Common mistakes

• Relying on an installer's old brochure. Sales materials printed in 2024 still advertise a 30% credit; it is gone.
• Confusing contract date with completion date. For homeowner credits, a 2025 signature did not lock anything in.
• Forgetting the carryforward. Unused 25D credit from a large 2024 or 2025 system carries to the next return; software does not always pull it forward if you switch programs.
• Double counting rebates. Where a rebate reduced the cost of 2025 equipment, the credit was computed on the net cost.
• Ignoring basis. Improvements add to your home's basis, minus credits and certain rebates, which matters at sale.

Lavish Larry made all five, which is impressive in a way.

Second example: basis after a credit

Illustration: A homeowner installed a $20,000 solar system in 2025, received a $1,000 utility rebate excluded from income, and claimed a 25D credit of 30% × $19,000 = $5,700. The basis added to the home is $20,000 − $1,000 − $5,700 = $13,300. Keep that computation; it is the number that matters when the house is sold years from now.

Should you still do the project?

Run the numbers without the credit. A heat pump replacing an aging resistance or oil system can still pay back quickly; solar paybacks depend heavily on your state, utility rates and net metering rules. A few honest questions:

• What is the payback period with rebates but no federal credit?
• How long will you stay in the home?
• Is the equipment you would replace near the end of its life anyway?
• Are you financing it, and at what rate?

A project that only made sense with a 30% subsidy probably does not make sense now. A project that made sense anyway still does.

Bottom line

For homeowners, the federal energy credit era is over for new projects as of October 2026. The remaining moves are housekeeping: claim or amend for 2025 projects, use carryforwards, keep basis records, and shop state and utility programs. Then judge any new project on its own energy savings. If Congress revives a credit, it will be news; until then, assume it is gone and let the payback math, not a vanished subsidy, decide. Check irs.gov before filing for any later changes.