For the last few years, homeowners could get 30% back on a new heat pump, better windows or a rooftop solar system through two federal tax credits. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, ended both of them early, effective after December 31, 2025.
If you finished a project in 2025, you can still claim it on your 2025 return. If you have unused solar or battery credit from earlier years, it may still help you in 2026 and later. Here's what changed and what's left.
The two credits that ended
The IRS describes the cutoffs this way:
- Energy Efficient Home Improvement Credit (section 25C): "The credit will not be allowed for any property placed in service after December 31, 2025."
- Residential Clean Energy Credit (section 25D): "The credit will not be allowed for any expenditures made after December 31, 2025."
The key word for both is installed. For the clean energy credit, the IRS treats an expenditure as made "when the original installation of the item is completed." Its OBBBA guidance adds that if installation is completed after December 31, 2025, the expenditure counts as made after that date, so no credit is allowed. Paying a deposit in 2025 doesn't help if the panels went live in 2026.
Say you paid a solar installer in full in November 2025, but the crew didn't finish until February 2026. Under the IRS guidance, that project doesn't qualify for the credit.
Claiming 2025 projects on your 2025 return
If your project was completed in 2025, you claim it on Form 5695, Residential Energy Credits, filed with your 2025 return. Here's how each credit worked for 2025.
Energy Efficient Home Improvement Credit (Form 5695, Part II)
This credit covered 30% of qualifying costs for efficiency upgrades to your main home, with annual caps:
| Item (2025) | Annual limit |
|---|---|
| Most improvements combined | $1,200 |
| Heat pumps and biomass stoves/boilers | $2,000 |
| Exterior doors | $250 per door, $500 total |
| Windows and skylights | $600 total |
| Home energy audit | $150 |
| Qualifying electrical components (each) | $600 |
Two rules catch people out. First, starting in 2025 you generally have to report a qualified manufacturer identification number (QMID) for each item. Insulation and air sealing are the main exceptions. Ask your contractor or the manufacturer for it if it isn't on your invoice. Second, this credit can't be carried forward. The IRS says, "You can't apply any excess credit to future tax years." If your 2025 tax is lower than the credit, the rest is lost.
Residential Clean Energy Credit (Form 5695, Part I)
This credit was 30% of the cost of qualifying clean energy property installed from 2022 through December 31, 2025. That includes solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and battery storage with a capacity of at least 3 kilowatt hours.
It generally applied to your main home, whether you own or rent it, and to a second home you live in part-time and don't rent out. Fuel cell property had to be for your main home. Landlords can't claim it for rental units.
Carrying forward unused clean energy credit
This is the part of the old rules that still matters for 2026. The Residential Clean Energy Credit is nonrefundable, so it can't reduce your tax below zero. But unlike the home improvement credit, any unused amount carries forward. The IRS says you can "carry forward any excess unused credit" and use it to reduce tax in future years.
Here's how that works with round numbers. Say you installed a $40,000 solar and battery system in 2025. Your credit is $12,000 (30%). If your 2025 tax after other credits is $7,000, you use $7,000 in 2025 and carry $5,000 into 2026. On your 2026 return, filed in early 2027, you claim that $5,000 through Form 5695, even though you made no new purchase.
A couple of practical notes:
- Keep your original invoices, proof of the installation completion date, and your filed 2025 Form 5695. You'll need the carryforward figure each year until it's used up.
- If your income or withholding changes, the timing of when you use the carryforward can change too. Review it each year, especially if you're also planning around other credits like the ones in our child tax credit guide.
What still applies in 2026?
For homeowners making improvements in 2026, there's no federal replacement for these two credits. A few related provisions lasted a little longer, but they don't help most homeowners, and as of this writing they have also ended:
- New Energy Efficient Home Credit (section 45L) was for eligible contractors who build or substantially reconstruct qualifying homes, claimed on Form 8908. It isn't available for homes acquired after June 30, 2026.
- Alternative Fuel Vehicle Refueling Property Credit (section 30C) isn't allowed for property placed in service after June 30, 2026.
- Energy efficient commercial buildings deduction (section 179D) isn't allowed for property whose construction begins after June 30, 2026.
State programs, local utilities and manufacturers may still offer rebates. Those are separate from federal tax credits and have their own rules, so check before you sign. Bought an EV too? See our article on the end of the EV tax credit. For the bigger picture, read navigating the 2026 tax changes.
When it's worth getting help
A single 2025 project with clean paperwork is usually simple. It's worth getting help if your installation finished close to December 31, 2025, if you're missing QMIDs, if you have a large clean energy carryforward to track, or if the home is partly a rental or used for business, which changes how costs are allocated.
Our team can review your Form 5695 and track any carryforward as part of personal tax preparation. Book an appointment when you're ready.
Sources
- IRS: FAQs for modification of sections 25C, 25D, 25E, 30C, 30D, 45L, 45W and 179D under the One, Big, Beautiful Bill
- IRS: Energy Efficient Home Improvement Credit
- IRS: Residential Clean Energy Credit
- IRS: Instructions for Form 5695 (2025)
- IRS: Credit for builders of energy-efficient homes
General information, not tax advice. Tax rules change and depend on your situation. Figures are for tax year 2026 unless noted; confirm current amounts at IRS.gov or talk to a Stellar Tax professional before acting.