The federal tax credit for energy-efficient home improvements, known by its tax code section 25C, has ended for new work. A federal law dated July 4, 2025, Public Law 119-21, cut it short. In an IRS fact sheet on the law, the agency says, "The credit will not be allowed for any property placed in service after December 31, 2025." If you finished a qualifying heating or cooling upgrade in 2025, you can still claim the credit on your 2025 tax return.
What happened to the 25C tax credit?
The IRS calls the law OBBB, short for the One, Big, Beautiful Bill. The same IRS fact sheet says the law "accelerated the termination of several energy credit and deduction provisions," and it lists 25C among them. The 2025 instructions for Form 5695 repeat the cutoff. They say you can't claim the credit "for expenditures or property placed in service after December 31, 2025."
The IRS's main Energy Efficient Home Improvement Credit page states the window this way: "You can claim the credit for improvements made through December 31, 2025." We found no IRS source that describes a replacement federal credit for heating and cooling work installed in 2026.
A related credit ended on the same date: the IRS page for the Residential Clean Energy Credit, known as 25D, says that credit "is not available for any property placed in service after December 31, 2025."
Who could claim the 25C credit for 2025 work
The credit covered improvements to your main home, which the IRS says is generally where you live most of the time. It had to be an existing home in the United States, not a new home. The IRS says you "can't claim the credit if you're a landlord or other property owner who doesn't live in the home."
The equipment also had to meet efficiency targets. For central air conditioners installed in 2025, ENERGY STAR's tax credit guidance says split systems needed at least 17.0 SEER2 and 12.0 EER2. Packaged systems needed at least 16.0 SEER2 and 11.5 EER2. Our guide to SEER2 ratings and regional minimums explains how to read these ratings.
For air source heat pumps installed in 2025, ENERGY STAR says models "recognized as ENERGY STAR Most Efficient are eligible for this credit." For qualifying heat pumps, the IRS adds that "Costs may include labor for installation."
How much the 25C credit was worth
The IRS says that beginning January 1, 2023, "the credit equals 30% of certain qualified expenses." Under two separate yearly caps, qualified heat pumps, heat pump water heaters, biomass stoves and biomass boilers shared a $2,000 cap each year. A separate $1,200 yearly cap covered other energy property and certain home improvements. That cap carried smaller limits of $250 per exterior door ($500 total), $600 for exterior windows and skylights, and $150 for a home energy audit.
The 2025 Form 5695 instructions also set "A credit limit of $600 for any qualified energy property item." Taken together, the IRS says you "may qualify for a tax credit up to $3,200."
25C credit limits for the 2025 tax year
- Heat pumps, heat pump water heaters, biomass stoves and boilers (per year)$2,000
- Other energy property and home improvements (per year, combined)$1,200
- Any single qualified energy property item$600
- Exterior windows and skylights$600
- Exterior doors (total)$500
- Home energy audit$150
The credit could only lower the tax you owed. The IRS explains, "The credit is nonrefundable, so you can't get back more on the credit than you owe in taxes. You can't apply any excess credit to future tax years."
How to claim 25C for a 2025 install on Form 5695
If your system was installed in 2025, these are the IRS steps:
- File Form 5695, Residential Energy Credits, Part II, with your 2025 tax return. The IRS 25C page says, "You must claim the credit for the tax year when the property is installed, not merely purchased."
- Include the manufacturer ID number for each item. The 2025 Form 5695 instructions say that for specified property placed in service in 2025, "you must include the four-character alphanumeric unique qualified manufacturer identification number (QMID) for each item."
- If you missed the credit, file an amended return. The IRS says that, generally, you must file "within 3 years after the date you filed your original return or 2 years after the date you paid the tax, whichever is later." The IRS adds, "If you filed early, count from the April tax deadline."
The law change did not remove the QMID step. The IRS fact sheet says manufacturers no longer need to file periodic reports. It adds, "A manufacturer is still required to register with the IRS to become a qualified manufacturer for its specified property to be eligible for the credit."
Paid in 2025 but installed in 2026
The 25C test is installation, not payment, and in its OBBB fact sheet, the IRS answers the paid-in-2025, installed-in-2026 question only for the 25D credit. For 25D, the fact sheet says, "If installation is completed after December 31, 2025, the expenditure will be treated as made after December 31, 2025, which will prevent the taxpayer from claiming the section 25D credit."
Home energy rebates in Washington, Arizona, Texas, Florida and Ohio
Federal home energy rebates are separate from the tax credit, and states run them. The U.S. Department of Energy says one program lets households "save up to $14,000 on efficient upgrades." DOE calls it the High-Efficiency Electric Home Rebate (HEEHR) Program. A second program, Home Owner Managing Energy Savings (HOMES), offers "up to $8,000" based on modeled energy savings, "with a minimum savings of 20%." DOE notes that states "may increase rebates for households with income less than 80% of the area median." DOE says, "Home Energy Rebates are now available in select states." Its page does not list which states.
As of October 2026, each state agency's page said the following.
| State | What the state agency's page says | Page date |
|---|---|---|
| Washington | For the federal rebates, Commerce says it is evaluating DOE program changes released June 1 and working with its rebate administrator on next steps. A separate state-funded HEAR program awarded $39,323,876 to 40 local administrators for low- and moderate-income households. | Updated June 15, 2026 (federal); September 8, 2026 (state) |
| Arizona | Efficiency Arizona is accepting applications that meet its new guidelines. Under new guidelines that apply to rebate reservations made on or after September 1, 2026, rebates no longer cover replacing gas appliances with electric ones. | Announced July 21, 2026 |
| Texas | The State Energy Conservation Office says the programs are "in the planning and design phase." A launch date will follow DOE approval. | Updated August 21, 2026 |
| Florida | The state's program page says HEEHR and HOMES "are expected to launch in the future." | No date shown |
| Ohio | The Department of Development says Ohio was awarded $249 million. Its only launch estimate, the fourth quarter of 2024 or the first quarter of 2025, has passed, and the page does not show a launch. | No update date shown |
Arizona's program site says, "Rebates cover a percentage of the total project costs, up to $14,000 per household, depending on income level." The Governor's Office of Resiliency says rebates are now "only permitted to replace existing electric appliances and heat pumps." It also reports that as of June 30, 2026, the program had issued 1,415 rebates totaling $4,754,936.
For Ohio and Florida, we could not confirm a current, dated status from a state source. Check the state agency's page before planning around a rebate.