Is There Still a Tax Credit for Energy Efficient Upgrades?

Short answerNo, not for new work. The IRS says the Energy Efficient Home Improvement Credit (25C) is not allowed for property placed in service after December 31, 2025, under Public Law 119-21 of July 4, 2025. One ENERGY STAR article still says 2032. Ask a tax professional about your own return.

What changed, when and who changed it

Congress changed the credit in Public Law 119-21, dated July 4, 2025. The IRS published its explanation on August 21, 2025, in fact sheet FS-2025-05. The cutoff is December 31, 2025, and the date that counts is when the property was placed in service.

Who says what

These pages don't all agree, so check the date before you rely on one.

IRS FAQ, August 21, 2025: not allowed for property placed in service after December 31, 2025.
IRS credit page, updated April 28, 2026: says you can claim improvements made through December 31, 2025, and also says property placed in service on or after January 1, 2023, and before December 31, 2025.
ENERGY STAR federal tax credits page, no updated date shown: credits are available through December 31, 2025.
ENERGY STAR water heater article by Nate Jutras, dated February 2, 2024: credits of up to $2,000 on eligible heat pump water heaters through December 31, 2032. That article is older than the law and doesn't match the IRS.

What this means for you

If a contractor or web page promises this credit on a job done now, ask them to show where the IRS says so. A quote that counts the credit in its price may be wrong. For work placed in service in 2025 or earlier, the IRS describes a credit of 30% of certain costs, with a $1,200 yearly limit for energy property and certain improvements and a separate $2,000 yearly limit for heat pumps, water heaters and biomass stoves or boilers.

What isn't settled

The IRS credit page says both through December 31, 2025, and before December 31, 2025, while the IRS FAQ says not allowed after December 31, 2025. If your work was placed in service right at the end of 2025, ask a tax professional. This page isn't tax advice. Congress can also change tax law again, so check the IRS page before you sign a contract based on any credit.

Common questions

Can I claim a water heater replacement on my taxes?

For a water heater placed in service in 2026 or later, the IRS says the 25C credit isn't allowed. For earlier years, the credit had its own rules and limits. Ask a tax professional about your return.

Does an electrical panel upgrade still qualify for a tax credit?

The IRS lists a cutoff for all property under this credit, so new work placed in service after December 31, 2025 doesn't qualify for 25C. Ask a tax professional about whether anything else applies to you.

Are there other ways to get help paying for upgrades?

Possibly. Federal rebate money runs through state programs, and availability differs by state. Check with your state energy office.