(Family Features) Homeowners still have time to take advantage of a federal tax credit of up to 30% of the cost of eligible energy-efficient home improvements. The Energy Efficient Home Improvement Credit (also known as the 25C tax credit) can help offset the expense of updating or upgrading major home systems while also lowering energy consumption.
Understanding the 25C Tax Credit
Homeowners in the United States may be eligible when they install qualifying energy-efficient equipment in their primary residence such as all-climate electric heat pumps, insulation, windows and other improvements. The credit is subject to some limitations; for example, a homeowner can only claim up to $2,000 per year for a heat pump. The installation must be an addition or improvement to an existing home, not a new home, and can be used in combination with other tax credits or incentives such as local, utility and federal incentives and IRA programs.
The current version of this tax credit was implemented Jan. 1, 2023, and expires Dec. 31, 2025. In addition, rising energy costs and potential regulatory changes in 2026, such as updated guidelines on refrigerant, make late 2025 a strategic time to upgrade systems.
Smart Ways to Use the Tax Credit
Generally, energy-saving upgrades are some of the most common home improvement projects because they enhance the home’s overall function while increasing the potential for cost savings on energy bills.
Some qualifying upgrades do double-duty by enhancing the home’s curb appeal while reducing energy requirements. Common examples include windows, skylights and exterior doors.
Insulation and air sealing materials such as caulk and weatherstripping are also common choices, especially in older homes where insulation may be below current standards and settling has created gaps for air leaks.
Another common selection for homeowners looking to take advantage of the 25C tax credit is climate control systems, and an increasing number are turning to all-climate, all-electric heat pumps. One major reason is their high performance when it comes to energy efficiency. According to the U.S. Department of Energy, today’s heat pumps can reduce electricity use for heating by 65% compared to electric resistance heating. In fact, Mitsubishi Electric all-climate, all-electric heat pumps have an efficiency rating at 260-490% compared to traditional systems at or below 100%.
In addition to their proven track record, contrary to a popular misconception that all-climate heat pumps are only for milder regions, the systems can operate quite effectively in both high heat and extreme cold. As a result, they provide homeowners with greater comfort and control of their indoor climate.
Take Steps to Beat the Deadline
If you’re a homeowner planning to make upgrades and claim 25C tax credits, now is the ideal time to get your project underway.
- Choose qualifying equipment. While some brands’ complete product lines meet the qualification criteria, others do not. Do your homework to ensure the model you’re installing is eligible for the credit. Your salesperson may be able to provide information, or you can visit the manufacturer website or contact the manufacturer directly for details.
- Work with a certified contractor. Many reputable brands, including Mitsubishi Electric, offer a contractor network with highly skilled, knowledgeable and reputable installers.
- Save your receipts to file. When you prepare your 2025 tax forms, you’ll need to complete IRS Form 5695. Specifically, you will need to provide the manufacturer’s pin number and other details about your purchase, including proof of purchase.
Find more tips to get started on a tax credit home upgrade project at mitsubishicomfort.com/inflation-reduction-act.
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