25C Energy Efficient Home Improvement Credit and 25D Residential Clean Energy Property Credit

The Big Picture

The 25C and 25D tax credits incentivize household electrification and efficiency upgrades by lowering the total cost of qualified electrification upgrades and select weatherization measures. 25C provides a capped 30 percent tax credit for heat pumps, heat pump water heaters, qualifying electrical panel upgrades, select weatherization measures, and energy audits.

For the first time, air source heat pumps for space heating/cooling and heat pump water heaters will be eligible for a tax credit of up to $2,000 per year, and electrical panel upgrades installed in conjunction with a heat pump or heat pump water heater will be eligible for a tax credit of up to $600. 25D provides an uncapped 30 percent tax credit for rooftop solar, battery storage (starting in 2023), and geothermal heating. The IRS has also allowed 25D to be applied to an electrical panel upgrade as long as it is installed in conjunction with and enables another eligible energy installation.

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