What Is the Home Energy Audit Tax Credit, and How Do I Apply?

The Home Energy Audit Tax Credit is part of the Energy Efficient Home Improvement Credit covered under US Federal Tax Code Section 25C. 

The Energy Efficient Home Improvement Credit is one of several federal government programs seeking to make energy more affordable and reduce the burden on the utility grid power supply.

The Residential Clean Energy Credit encourages the adoption of renewable energy sources like home solar panels and small wind energy systems.

Eligible US taxpayers can apply for both tax credits on IRS Form 5695 and file it with their annual federal income tax return.

Read on to learn how to apply for the Energy Efficient Home Improvement Credit — and how it works.*

How Does the Home Energy Audit Tax Credit Work?

The home energy audit tax credit is non-refundable and can only be applied to your federal income tax liability in the year the audit took place.

If you don’t pay income taxes or owe nothing in the year of the audit, you won’t be able to receive a credit.

Unlike with tax rebates, you’ll never get a refund check in the mail from the IRS to cover a qualified audit or home improvements under Section 25C — unless you’ve already overpaid on withholding.

In which case, any Energy Efficient Home Improvement Credit balance will be added to your existing refund.

A professional home energy audit is a detailed assessment of your home’s energy efficiency undertaken by a qualified expert using specialist diagnostic tests and tools.

Learn what’s included in a home energy audit here.

For many homeowners and renters, it’s a logical first step before investing in energy efficiency improvements to their homes.

While conducting a DIY energy audit is possible, you’ll lack access to diagnostic testing, specialist tools, and modeling software that a professional will use to assess and make an action plan for improving your home efficiency. 

Thankfully, the Energy Efficient Home Improvement Credit is there to help defray your costs. 

Who Qualifies for the Energy Efficient Home Improvement Credit?

The Energy Efficient Home Improvement Credit is open to renters and homeowners who pay federal income taxes.

Improvements must be made to your primary residence — i.e., the dwelling you live in for most of the year.

There isn’t a rigid number of days required to claim a dwelling as your primary residence but it’s generally taken to mean you live there for over half the year.

Secondary residences, like vacation houses, can be eligible for the Residential Clean Energy Credit but not for home energy audits and improvements.

Renters are not eligible for the Residential Clean Energy Credit.

It’s not an IRS requirement, but if you don’t own your primary residence, it’s best to get your landlord’s permission before making any improvements.

What Qualifies for the Energy Efficient Home Improvement Credit?

Professional home energy audits are just one of many expenses that qualify for tax credit under Section 25C.

Here’s the complete list of expenses that currently qualify for the Energy Efficient Home Improvement Credit.

(Source: DoE)

Home Energy Audits

For a home energy audit to qualify for a Section 25(C) tax credit, stringent requirements must be met.

  • The energy assessment of your primary home must be made by a qualified home energy auditor.
  • An individual must be certified under at least one of the Department of Energy’s certification programs to qualify as a professional.

    Typically, the individual must have obtained certification before the audit, although in some cases, being under the direct supervision of a qualified home energy auditor is sufficient.

    If you wish to claim the 25C credit, you must demand proof of certification before agreeing to or paying for the audit.
  • A signed, written report from the auditor must be obtained and conducted under industry best practices.

    According to the IRS,  the written report and inspection must “identify the most significant and cost-effective energy efficiency improvements with respect to the home, including an estimate of the energy and cost savings with respect to such improvement.”

    Additionally, the report must include:
    • The qualified home energy auditor’s name and relevant employer identification number (EIN) or other type of appropriate taxpayer identifying number if the auditor does not have an EIN
    • An attestation that the qualified home energy auditor is certified by a qualified certification program and
    • The name of such qualified certification program

It’s not an IRS requirement, but using a reputable, qualified home energy auditor is always a best practice.

Learn more about home energy audits here.

(Source: Energy Star)

Building Envelope Improvements

The “building envelope” consists of all the structural elements of your dwelling that separate the interior from the exterior of your home.

For example:

  • Roof
  • Exterior walls
  • Windows
  • Exterior doors

Qualified building envelope improvement expenses can include the purchase and installation costs of: 

  • Insulation Materials or Systems
    • Loose-Fill Insulation: Blown-in cellulose, fiberglass, mineral wool, etc.
    • Batt or Roll Insulation: Fiberglass, mineral wool, etc.
    • Rigid Board Insulation: Polystyrene (EPS or XPS), polyisocyanurate, etc.
    • Spray Foam Insulation: Open-cell and closed-cell polyurethane.
    • Insulation materials in attics, interior and exterior interiors, floors, crawl spaces and basements
  • Exterior Doors
  • Exterior Windows and Skylights 

Most of the above must be Energy Star certified to qualify for the credit.

Residential Energy Property

The purchase and installation costs of qualified energy-efficient equipment are also eligible for Section 25(C) credit. 

  • Central Air Conditioners
  • Heat Pumps
  • Natural Gas, Propane, or Oil Water Heaters
  • Natural Gas, Propane, Oil Furnaces, or Hot Water Boilers
  • Advanced Main Electrical Panel (if required to install one of the above)

All of the above must meet stringent Energy Star certified energy efficiency requirements, and some require additional qualifications.

Learn more here.

Renewable energy systems such as:

  • Solar Panels (Photovoltaic – PV)
  • Solar Water Heaters (Solar Thermal Systems)
  • Wind Turbines
  • Geothermal Heat Pumps (Ground Source Heat Pumps)
  • Fuel Cell Property
  • Home Battery Storage (Over 3kWh capacity)

are covered under Section 25D, which has very different requirements for system and taxpayer eligibility.

Learn more about how to apply for the Residential Clean Energy Credit here.

What Are the Annual Limits?

From January 1, 2023, to December 21, 2032,  qualified energy-efficient improvements to your primary home may be eligible for a tax credit of up to $3,200.

Home Energy Audit Limit

Starting in 2024, professional home energy audits are eligible for a tax credit for 30% of the assessment’s cost, up to a maximum of $150.

For example, if your home energy audit costs $600, you should be eligible for a tax credit of $150 — even though 30% of $600 is $180, the credit is capped at $150.    

Building Envelope Improvement Limit

Qualified energy efficiency improvements to the exterior shell of your home may also qualify for Section 25(C) with the following conditions and limits.

The total annual limit for building improvements PLUS the Home Energy Audit is $1,200 each year.

Building improvements are limited to purchase cost only — labor and installation costs are not eligible for credit.

The types of improvements that qualify have further restrictions and limits.

According to the IRS:

  • Building envelope components must have an expected lifespan of at least 5 years.
  • Exterior doors that meet applicable Energy Star requirements. Credit is limited to $250 per door and $500 total.
  • Exterior windows and skylights that meet Energy Star Most Efficient certification requirements. Credit is limited to $600 total.
  • Insulation and air sealing materials or systems that meet International Energy Conservation Code (IECC) standards in effect as of the beginning of the calendar year that is two years prior to the calendar year in which such component is placed in service. For example, materials or systems installed in 2025 must meet the IECC standard in effect on Jan. 1, 2023. These items don’t have a specific credit limit other than the maximum credit limit of $1,200. Insulation and air sealing materials or systems are the only types of qualifying property that do not have to meet the qualified manufacturer and PIN requirements.

If you’re looking to max out your tax credit, a viable action plan could look like this.

Expense TypeCost30% Credit (25C)
Home Energy Audit$500$150
2 x Exterior Doors$500 $150
Exterior Windows$1,500$450
Insulation$2,000$600
Total$4,500$1,350

Assuming that you and all the above improvements qualify, you’d be eligible for the maximum credit of $1,200 against your personal income tax liability in the year the renovations took place.

Even though 30% of $4,500 is $1,350, you can’t deduct more than the $1,200 maximum cap.

However, there’s no limit to how many times you can claim the credit in subsequent years until 2032.

Working with a qualified home energy auditor will help you create a customized action plan to maximize your energy bill savings and potential tax benefits year over year.

Residential Energy Property Limit

On top of credits for home energy audits and efficiency improvements, Section 25(C) also enables you to take up to a $2,000 tax credit against the purchase costs of Residential Energy Property.

Unlike building envelope improvements, installation labor costs may also be covered for specific systems.

Here’s how the limits break down by energy property type.

Qualified Energy Property (Home Energy Systems)

The maximum annual limit for qualified home energy systems is $2,000 per tax year.

Similar to building envelope improvements, each system has specific caps, and you can combine the property costs of multiple purchases to reach the maximum deduction by following the steps outlined below.

  • Central Air Conditioners: Replacing existing units with more efficient models that meet specific efficiency requirements.
    • Annual Limit: Up to $600 credit for a qualified Central AC unit per year. Maximum cap of $2,000 combined with other qualifying heat pump or boiler costs.
  • Heat Pumps: Replacing existing units with more efficient models that meet specific efficiency requirements.
    • Annual Limit: Up to $2,000 credit per year. Maximum cap of $2,000 combined with other qualifying heat pump, boiler, or air conditioner costs.
  • Natural Gas, Propane, or Oil Water Heaters: Replacing existing units with more efficient models.
    • Annual Limit: Up to $600 credit per year. Maximum cap of $2,000 when combined with other qualifying heat pump or boiler costs.
  • Natural Gas, Propane, or Oil Furnaces or Hot Water Boilers that replace existing units with more efficient models.
    • Annual Limit: Up to $600 credit per year, with a maximum of $2,000 when combined with other qualifying heat pump, boiler, or air conditioner costs.
  • Main Electrical Panel Upgrade: Upgrading your home’s main electrical panel in conjunction with other qualifying energy-efficient appliances.
    • Annual Limit: Up to $600 credit per year. Maximum cap of $2,000 when combined with other qualifying heat pump or boiler costs.

All residential energy properties must meet stringent efficiency standards that vary by the type of system.

It’s essential to confirm system eligibility before purchase installation.

Learn more about system eligibility requirements here.

Qualified Energy Property (Fuel Cell Systems)

Fuel cell systems that generate electricity with hydrogen and oxygen are the only systems eligible for both the Energy Efficient Home Improvement Credit (25C) and the Residential Clean Energy Credit (25D).

Fuel cell systems that burn fossil fuels like natural gas are not “clean” and do not qualify under 25 (D).

The actual fuel cell system is not covered under 25(C), but improvements required to install the unit in your home — like advanced main electricity boards — may be covered under building envelope improvements, capped at $1,250.

Unlike the Energy Efficient Home Improvement Credit (25C), the Residential Clean Energy Credit (25D) covers 30% of the total purchase and installation costs of eligible systems — with no spending cap and no limit on the number of times you can take the deduction annually from now until 2032.

How Can I Apply?

Whether you prepare your own taxes or work with an accountant or other professional, applying for the Energy Efficient Home Improvement Credit is the easy part.

Ensuring that you and any improvements or energy property purchases you make are eligible for the deduction is more of a challenge — as outlined above.

Assuming that you’ve done your homework and made qualified purchases and improvements, the next step is to fill out the appropriate form and take the deduction on your primary income tax return.

Here’s a step-by-step guide to claiming the Energy Efficient Home Improvement Credit (25C) — including the Home Energy Audit Tax Credit — on your income tax return.

Claiming Residential Energy Credits Against Personal Income Taxes

The process for claiming your Residential Energy Tax Credits on IRS Form 1040 for 2024 is as follows.  

  1. Fill Out Form 5695* 

Claims for both the Section 25C Energy Efficient Home Improvement Credit and Section 25D Residential Clean Energy Credit are claimed on IRS Form 5695 for Residential Energy Credits.

Complete instructions can be found here

The same form is used for all US taxpayers, including single, married filing jointly, married filing separately, head of household, or qualifying widow(er)s eligible to claim either the 25C or 25D credit (or both).

You can file for both credits in the same tax year as long as you meet all the eligibility requirements. 

Carefully fill out Section A for Section 25D credits, then do the same in Section B for 25C credits (if filing for both).

You are not required to submit invoices or receipts for eligible costs — or copies of your home energy audit — with Form 5695.

However, maintaining detailed records of every transaction is essential.

If your tax returns are investigated or you’re subject to an IRS audit, you must prove all the expenses you’ve claimed and meet the relevant eligibility requirements.

False, ineligible, or undocumented tax credit claims can result in stiff civil penalties, fines, criminal charges, and imprisonment.

If in doubt, consult a tax preparation professional before making Section 25C or 25D claims.

  1. Enter Your Residential Energy Credits on IRS Form 1040, Schedule 3

Schedule 3 is an optional form attached to your Individual Income Tax Return (1040).

It’s used to claim Residential Energy Credits and many other types of credits and payments.

On the 2024 Schedule 3 form, your energy credit claims from Form 5695 are entered on Lines 5 (a) and 5 (b).

  1. Total Your Nonrefundable Credits

In Part 1 of the Schedule 3 form, follow the instructions to total all nonrefundable tax credits you claim for the relevant tax year.

Enter the total on Line 8 of the Schedule 3.

  1. Enter Your Nonrefundable Credits on Your 1040 U.S. Individual Income Tax Return

Enter your line 8 total from Schedule 3 onto your Form 1040 Income Tax Return.

On the 2024 1040, the total is entered on Line 20 in the Tax and Credits section. 

  1. Complete and File Your Taxes

Complete your 1040 form and ensure you attach all the relevant supplementary forms.

If you’re only claiming a Section 25D or 25C Residential Energy Credit, the following forms are required to file your taxes.

  • Form 1040 – Individual Income Tax Return
  • Schedule 3 (Form 2024) – Additional Credits and Payments
  • Form 5695 – Residential Energy Credits

Many US taxpayers must attach forms for additional income and above-the-line deductions, such as Section 1 (1040) and Section 2 (1040).

If you’re unsure how to proceed, consult a tax preparation professional.

IRS Forms are subject to change. Ensure you’re using the correct form for the filing year and up-to-date IRS guidance.

Frequently Asked Questions

What Documentation Is Needed for a Home Energy Tax Credit?

The only tax documents required to apply for Residential Energy Credits Section 25(C) and 25(D) are IRS Form 5695 and Schedule 3 (Form 1040). Both must be completed accurately and attached to your Individual Income Tax Return (Form 1040).  Do not submit invoices or other documents to claim the credit. However, should your return be investigated or subject to an IRS audit, you’ll be expected to produce thorough proof of eligibility and payment for each deduction.  

How Does the IRS Verify Home Energy Tax Credits?

There are no additional verification requirements for Residential Energy Credits under IRS Sections 25C and 25D. However, any energy-efficient home improvements, home energy audits, and purchases of residential energy property are subject to stringent qualifications and/or certifications. If any claims you make on IRS Form 5695 and your Individual Income Tax Return (Form 1040) turn out not to qualify… Best case, they’ll be rejected if you get audited. Double-check eligibility before making improvements or purchasing energy property. And always keep your receipts. 

Final Thoughts

A professional home energy audit is one of the best first steps you can take to increase efficiency and lower your power bills.

The home energy tax credit is easy to claim — if you (and your auditor) meet all the requirements.

The Residential Clean Energy Credit is a far more generous deduction against 30% of the total purchase and installation costs of eligible solar power, home batteries, and other renewable energy systems.

A whole-home solar generator like EcoFlow DELTA Pro Ultra can reduce — or eliminate — your dependence on utility grid power, offering energy security and slashing your electricity bills.

EcoFlow offers a wide assortment of solar generators and portable power stations for everything from camping to whole-home backup off-grid.

Check out our selection today.

*Disclaimer: Before reading this guidance, please remember that tax matters can be highly individualized and complex. EcoFlow does not provide any assurances or guarantees concerning potential tax credits associated with our products. Any information in this guidance is solely for educational purposes and shall not be construed as legal advice. We recommend you rely on the expertise of tax professionals for accurate and personalized tax advice.

ECOFLOW
ECOFLOWhttps://blog.ecoflow.com/us/
EcoFlow is a portable power and renewable energy solutions company. Since its founding in 2017, EcoFlow has provided peace-of-mind power to customers in over 85 markets through its DELTA and RIVER product lines of portable power stations and eco-friendly accessories.

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