Taxes for homeowners · IRS Form 5695Home energy tax credits ended after 2025: what buyers of homes with solar or new systems should know

Two federal credits for home energy improvements have ended, according to the IRS instructions for Form 5695 (2025). The residential clean energy credit – 30% of the cost of solar electric and solar water heating property, small wind, geothermal heat pumps, battery storage and fuel cells – can't be claimed for expenditures made after December 31, 2025. The energy efficient home improvement credit – 30% for insulation, exterior doors, windows, central air conditioners, water heaters, furnaces, electrical panel upgrades and home energy audits, up to $1,200 a year, plus up to $2,000 a year for heat pumps, heat pump water heaters and biomass stoves and boilers – can't be claimed for expenditures or property placed in service after December 31, 2025. Timing matters: costs are treated as paid when the original installation is completed, and for the residential clean energy credit on a newly built home, when the owner's original use of the home begins – so a new home with solar that a buyer first moves into in 2026 doesn't qualify. Unused residential clean energy credit from 2025 can be carried to 2026. The energy efficient home improvement credit applied only to an existing main home; the residential clean energy credit could also apply to a home under construction and, for most items, to a home that isn't the main home. When a credit was allowed, the owner reduces the home's cost basis by the credit.