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. But since taking office, President Trump’s administration has slowed or halted approvals for these programs, and it’s still unclear whether rebates for Illinois residents 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 received funding prior to Trump’s inauguration. Since then, no new state rebate programs have launched.
Minnesota received approval for its program in late 2024. As of today, its Commerce Department’s website reports it “anticipates opening the HEAR program to eligible applicants statewide” in late 2025.
Websites of most other states still report their programs will be available in 2025 but we have found it difficult to get updated info on them.
We’Il let you know if and when these generous rebate programs become available for this area.
Check on Programs Available from Local Utilities
Click here for a list of incentives from local utility companies in effect in July 2025. Programs come and go; check with your utility and the Database of State Incentives for Renewables & Efficiency for up-to-date info.
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
