IRA Home Improvement Tax Credits 2026: Complete Guide to Every Credit

The Inflation Reduction Act created the largest expansion of home energy tax credits in U.S. history. If you're making home improvements between now and 2032, understanding these credits can save you thousands — sometimes tens of thousands — of dollars.

This guide covers every credit available in 2026, what qualifies, the dollar limits, and how to claim them.

Two Main Credit Types

All residential IRA energy credits fall under two sections of the tax code:

Section 25C — Energy Efficient Home Improvement Credit

• For: Insulation, air sealing, windows, doors, heat pumps, water heaters, home energy audits
• Rate: 30% of cost
• Annual cap: $3,200/year (resets each tax year)
• Available: Through 2032

Section 25D — Residential Clean Energy Credit

• For: Solar panels, solar water heaters, home battery storage, geothermal heat pumps, small wind
• Rate: 30% of total installed cost
• Annual cap: None (no dollar limit)
• Available: Through 2032 at 30%, then 26% (2033), 22% (2034)

Section 25C Credits by Category

Heat Pumps (Up to $2,000)

Qualifying equipment: Electric heat pumps (air-source) and heat pump water heaters that meet ENERGY STAR Most Efficient criteria.

| Equipment | Credit | Notes | |-----------|--------|-------| | Air-source heat pump (heating + cooling) | 30% of cost, up to $2,000 | Must meet ENERGY STAR Most Efficient — check the ENERGY STAR certified products list | | Heat pump water heater | 30% of cost, up to $2,000 | Shared annual cap with heat pumps — combined total cannot exceed $2,000 |

The $2,000 heat pump credit is the single most valuable item in the 25C category. A $10,000 heat pump installation returns $2,000 as a federal tax credit (20% effective rate at the $10K price). A $6,667 installation hits the maximum 30% rate.

Insulation and Air Sealing (Up to $1,200, shared)

Qualifying equipment: Insulation materials, air sealing materials, bulk insulation products that meet IECC standards.

| Improvement | Credit | Notes | |-------------|--------|-------| | Insulation (attic, walls, crawl space) | 30% of material cost, up to $1,200 | Labor costs do not qualify — materials only | | Air sealing materials | 30% of material cost, included in $1,200 cap | Caulk, weatherstripping, spray foam materials |

Note: Labor costs for insulation installation do not qualify under 25C. Only the material cost (bags of blown insulation, rolls of batt insulation, spray foam materials) qualifies. If a contractor charges $1,000 for materials and $800 for labor, you claim 30% of $1,000 = $300 credit.

Windows and Skylights (Up to $600)

| Improvement | Credit | Notes | |-------------|--------|-------| | Exterior windows and skylights | 30% of cost, up to $600 | Must meet Energy Star requirements (U-factor ≤ 0.30, SHGC as applicable) | | Exterior doors (primary) | 30% of cost, up to $500 per door, max $250/door | Must meet Energy Star requirements |

Home Energy Audits (Up to $150)

A qualified home energy audit by a certified auditor (BPI or RESNET certified) qualifies for a $150 credit — dollar for dollar off your federal taxes. This is separate from the other 25C items and doesn't reduce your $1,200 non-heat-pump cap.

See our professional vs. DIY home energy audit guide for what qualifies and how to find a certified auditor.

Electrical Panel Upgrades (Up to $600)

If you're installing a heat pump or EV charger and your panel needs upgrading, the panel upgrade cost qualifies for up to $600 credit under 25C — but only if the upgrade is in connection with the other qualifying improvement.

Annual Cap Summary (25C)

| Category | Annual Cap | |----------|------------| | Heat pumps + heat pump water heaters | $2,000 combined | | Insulation + air sealing (materials only) | $1,200 combined | | Windows + skylights | $600 | | Exterior doors | $500 (max $250/door) | | Home energy audit | $150 | | Electrical panel (with qualifying improvement) | $600 | | Maximum 25C credit per year | $3,200 |

Section 25D Credits by Category

Solar Panels — 30% with No Cap

The 30% Residential Clean Energy Credit on solar panel systems is the most impactful single credit in the IRA for homeowners. A $25,000 solar installation returns $7,500 in federal tax credits.

| System | Credit | |--------|--------| | Solar photovoltaic (PV) panels | 30% of total installed cost | | Solar water heating systems | 30% of installed cost | | Solar installation labor and equipment | Included |

The 30% includes: Panels, inverter, racking, wiring, monitoring equipment, and installation labor. It does not include the cost of a battery that's charged solely from the grid (though grid-charged batteries now qualify separately under an IRA amendment).

See our are solar panels worth it analysis for full payback calculations.

Home Battery Storage — 30% with No Cap

This is the change that matters most in 2026: Since 2023, standalone home battery storage systems qualify for the 30% Section 25D credit without requiring solar panels. You do not need to have or install solar to claim the battery credit.

| System | Credit | |--------|--------| | Home battery backup (≥3 kWh capacity) | 30% of total installed cost | | Battery + solar combo | 30% of combined installed cost |

A $12,000 Tesla Powerwall 3 installation = $3,600 tax credit. Two Powerwalls at $21,000 = $6,300 tax credit.

See our home battery backup without solar guide and best home battery systems for full cost breakdowns.

Geothermal Heat Pumps — 30% with No Cap

Ground-source (geothermal) heat pump systems qualify under Section 25D at the full 30% rate with no annual cap. These are expensive installations ($15,000–$30,000 installed) where the credit is especially meaningful.

Stacking Federal Credits with State Incentives

Federal tax credits can be combined with state incentives. Key programs:

California:

• SGIP (Self-Generation Incentive Program): $200–$1,000/kWh rebate on batteries (income-qualified)
• PG&E / SCE / SDG&E rebates for heat pumps: $500–$2,000

New York:

• NY-Sun incentive: $0.20–$0.35/watt for solar
• Con Edison battery storage incentive: $250–$350/kWh

Massachusetts:

• Mass Save heat pump rebates: $500–$2,000
• SMART solar incentive program

Texas:

• CPS Energy (San Antonio): $2,500 heat pump rebate
• Austin Energy: Battery storage and solar rebates

All states: Check dsireusa.org for current state and utility incentives by zip code.

How to Claim: IRS Form 5695

1. Keep all receipts, manufacturer certification statements, and contractor invoices
2. Download IRS Form 5695 (available at irs.gov)
3. Complete Part I (Section 25D) for solar/battery systems
4. Complete Part II (Section 25C) for efficiency improvements
5. Transfer the credit totals to Schedule 3 of your Form 1040
6. The credit reduces your federal income tax liability dollar for dollar

Important: These are nonrefundable credits — they reduce your tax liability to zero but cannot generate a refund. If your credit exceeds your tax liability in a given year, any unused Section 25D credit can be carried forward to future tax years. Section 25C credits cannot be carried forward.

2026 Credit Planning Strategy

To maximize credits across multiple years:

Year 1 (2026): Install heat pump water heater ($2,000 credit) + attic insulation ($600 credit) = $2,600 total 25C credits

Year 2 (2027): Install air-source heat pump to replace HVAC ($2,000 credit) + windows ($600 credit) = $2,600 total 25C credits

Either year: Add solar + battery ($7,500–$12,000+ credit, 25D, no annual limit)

Total over 2 years: $5,200 in 25C credits + solar/battery credits

By spreading 25C improvements across tax years, you avoid the $3,200 annual cap and claim the maximum credit for each improvement in its own year.

For project-specific guidance, see our guides on home battery backup sizing, home battery backup costs, and our DIY home energy audit checklist to find which improvements deliver the best ROI before claiming credits.