Federal Tax Credits for Energy Efficient Home Improvements and Solar Ending Soon
Last updated July 18, 2025
On July 4, President Trump signed into law a sprawling bill that ended generous tax credits for green-energy projects. You can still claim the “Energy Efficient Home Improvement Credit” when preparing your 2025 tax return, but you must complete and pay for eligible projects by December 31.
Act Fast to Take Advantage of Canceled Federal Tax Credits
You can still claim the “Energy Efficient Home Improvement Credit” if you complete and pay for projects by the end of 2025. This incentive provides tax breaks to homeowners who make green improvements to their primary residences. The credit is equal to 30 percent of the cost of the following types of eligible projects; for some there are individual annual maximum allowable credits:
- Air-sealing and insulation improvements—no cap
- Central ACs—$300 cap for most systems
- Energy audits—$150 cap
- Exterior doors—$250 per door, $500 limit for multiple doors
- Gas and oil furnaces—$600 cap for units with 97+ AFUE
- Windows and skylights—$600 cap
If you do more than one of the projects listed above there’s a maximum tax credit of $1,200 each year.
A separate tax credit of up to $2,000 is available if you buy a qualifying heat pump, heat pump water heater, or biomass stove or boiler (for example, one that burns wood pellets). That credit also goes away at the end of 2025.
If you install a ground-source heat pump or solar panels you may qualify for a 30 percent federal tax credit with no cap. Again, you have to complete all work by the end of 2025 to get the incentive. Industry experts predict that without the tax credit, far fewer homeowners will purchase these systems.
Tax Credits for Electric Vehicle Purchases Ending Even Sooner
The generous tax credits for eligible EV purchases will expire even sooner, on September 30, 2025. My colleage Herb Weisbum reports on those changes here.
Rebate Programs Funded by the Inflation Reduction Act Languish
The new law that ended energy efficiency tax credits did not cancel rebate programs authorized by the Inflation Reduction Act (IRA) of 2022. California implemented its program during the Biden administration but the funds it received were depleted quickly; it now offers rebates only for multi-resident buildings. Click here for more information on what’s still available.
For other states, President Trump’s administration has slowed or halted approvals for these programs; it’s still unclear whether rebates for residents of most states will ever launch.
The IRA allotted more than $350 billion for energy and climate programs by establishing incentives for U.S. households and businesses to shift to technologies that consume less energy and cut greenhouse-gas emissions. About $80 billion of that was earmarked for rebates of up to $14,000 per household for making green energy upgrades over the next decade. The largest rebates would have encouraged households to switch to heat pumps to heat and cool their homes. These aren’t tax credits; they’re point-of-sale rebates that homeowners will receive as discounts as they make preapproved improvements.
The IRA required each state to create its own rebate program and then submit its plans to the Department of Energy for approval. Only a handful of states, including California, received funding prior to Trump’s inauguration. Since then, no new state rebate programs have launched. Websites of most states still report their programs will be available in 2025 but we have found it difficult to get updated info.
Check on Programs Available from Local Governments and Utilities
In most parts of the U.S., utility companies offer rebate programs for energy-saving improvements. But, unfortunately, PG&E historically has not offered such assistance. It recently offered small rebates ($75 for a smart thermostat, $90 for efficient room air conditioners, $75 for efficient water heaters) but at the time of this writing that program had been paused.
Some smaller utilities and local governments periodically offer rebates. For example, Marin County offers free energy audits, a $250 rebate for induction cooktops or ranges, and a $500 to $2,000 rebate for heat pump water heaters.
For up-to-date info on programs available in your community, check with your utility company and the Database of State Incentives for Renewables & Efficiency (DSIRE).
Before starting a project, confirm that you qualify. Rebate programs usually require homeowners to work with the utility’s “approved” contractors or to file paperwork before installations.
Other Ways to Save Energy and Cut Costs
Our discussion on how to save energy at home hits on more than 30 changes you can can make in and around your home, from cheap-yet-effective steps to upgrades that require upfront spending, but quickly pay for themselves from lower utility bills to systems and renovations that minimize what you pull off the grid, but come at steep prices.
See also our in-depth advice on:
- Insulation and air-sealing improvements
- Solar energy projects
- Energy audits
- Selecting heating and air-conditioning equipment
- Installing new windows
