What is the 25C tax credit?

​

Also known as the Energy Efficient Home Improvement credit, the 25C tax credit is a government program that incentivizes energy efficiency by decreasing the amount of taxes owed by eligible homeowners for installing qualifying upgrades in their homes.

​

How much will your Energy Efficient tax credits be?

​

Well, it depends. Your tax bill could be reduced by a maximum of $3,200 in a single year, but the actual amount varies based on the type of upgrades installed. Let us explain:

​

Detailing the key facts about the Energy Efficiency tax credit

​

• As of January 1, 2023, the 25C tax credit reimburses up to 30 percent of the equipment and installation costs for qualifying home upgrades. For instance, if your home undergoes a $3,000 weatherization project, you could receive a tax deduction of $900 applied to the total owed that year.

​

• The credit is not unlimited. It maxes out annually at $2,000 for heat pumps and heat pump water heaters, and $1,200 for other upgrades.

​

• The credit is not refundable. It applies only in the reduction of the amount of taxes owed. 25C tax credit money is ineligible to be returned as a refund.

​

• The credit resets every year, and you can therefore take advantage of the credit repeatedly. To illustrate, if you receive a 25C tax credit this year for installing a condenser and air handler, you are eligible to receive another 25C tax credit in the future for installing a furnace and coil.

​

• The Energy Efficient Home Improvement program is in effect until 2032. The amount of the credit is expected to decrease thereafter. If you’re considering making energy-efficient upgrades to your home, this decade is the optimal timeframe to get it done. With respect to the current trend of skyrocketing energy costs, sooner is more than likely better.