2025 Home Energy Tax Credits

Got questions about home energy tax credits? We’ve got answers (at least more than most contractors). Since 2006, EDGE Energy has helped homeowners in the DMV claim over $24 million in tax credits.

A quick disclaimer

We’re home energy contractors, not tax professionals.

This page is for informational purposes only and shouldn’t be relied on for tax, legal, or accounting advice. Before making any decisions, consult your tax advisor to ensure you maximize your savings.

That said, we do our best to provide up-to-date and accurate information. As an ENERGY STAR® award-winning contractor, EDGE Energy is committed to transparency and helping homeowners navigate incentives effectively.

Overview of 2025 Home Energy Tax Credits

Upgrade Type	Credit Amount	Annual Limit	Key Details
Solar Panels & Battery Backup	30% of costs	No annual limit	Covers rooftop solar, battery storage, and solar water heating.
Electrical Panel Upgrades	30% of costs, up to $600	Included in $1,200 annual limit	Must support eligible energy upgrades.
Heat Pumps	30% of costs, up to $2,000	$2,000 (in addition to $1,200 annual limit)	Includes heat pump water heaters and biomass stoves.
Other HVAC Equipment	30% of costs, up to $600	Included in $1,200 annual limit	Central AC, water heaters, and furnaces qualify.
Insulation	30% of costs, up to $1,200	$1,200	Includes attic, wall, and floor insulation.
Windows & Doors	30% of costs, up to $600 for windows & $500 for doors	Included in $1,200 annual limit	ENERGY STAR-certified products qualify.
Home Energy Audits	30% of costs, up to $150	$150	Must be performed by a qualified professional.

You may be wondering...

What’s the first step to claim a home energy tax credit?

Start by giving us a call at (888) 532-0197, or send us a message to book an appointment with one of our consultants. We’ll help you find the best energy-saving upgrades, and you'll get a complete breakdown of the pricing, rebates and tax credits.

How does a federal energy tax credit work?

A federal energy tax credit is an incentive that helps homeowners save money when investing in solar panels, heat pumps, insulation, and other energy-efficient upgrades.

It provides a dollar-for-dollar reduction in the amount of federal income tax you owe—or increases your refund if applicable.

Tax Credits vs. Tax Deductions

Both lower your tax burden, but in different ways:

Tax credits directly reduce your tax bill or increase your refund.
Tax deductions lower your taxable income, which may reduce the amount you owe.

Tax Credits vs. Rebates

A tax credit is claimed when filing your federal income taxes for the previous year, while rebates or cash incentives provide savings upfront—usually within a few weeks after your project is completed.

While there are no federal rebates for energy upgrades, homeowners in Maryland, D.C., and Virginia may qualify for state and utility-based rebates to further reduce costs. EDGE Energy can help you navigate both federal tax credits and local incentives to maximize your savings.

How do I claim a home energy tax credit?

To claim a home energy tax credit, use IRS Form 5695 when filing your federal taxes. This form helps you calculate and apply for:

The Residential Clean Energy Credit – For solar panels, solar water heaters, and other renewable energy upgrades.
The Energy Efficient Home Improvement Credit – For insulation, air sealing, energy-efficient windows, and more.

Complete Form 5695, include the credit amount on your 1040 tax return, and keep records of your upgrades in case of an audit. Consult a tax professional if you’re unsure about eligibility.

How much can you can save with tax credits?

Solar Panel Tax Credit 2025

The federal solar tax credit lets homeowners claim 30% of the cost of installing solar panels and battery storage. This credit applies to:

Rooftop solar systems: Reduce your electric bills and increase home value.
Battery storage: Store excess solar energy and use it during power outages.
Electrical panel upgrades: If your panel needs an upgrade to support solar, it qualifies.
Solar water heating: Use solar energy to heat water for your home.

Case study: How a Maryland homeowner saved big with her solar panel tax credit

Jennifer F. in waited until the incentives were right before installing solar panels and battery backup.

With the federal tax credit covering 30% of the costs, plus state incentives, she slashed her electricity bills and gained energy independence.

Heat Pump Tax Credit 2025

Homeowners can claim a 30% tax credit (up to $2,000) for installing a heat pump. This applies to:

High-efficiency heat pumps: Replace your gas furnace or outdated AC.
Heat pump water heaters: Use 70% less energy than traditional water heaters.
Ductless mini-splits: Improve home comfort with zoned heating and cooling.

Case study: A gas leak forced this family out - electrification brought them home

Dona B. and her children had to leave their home after a gas furnace leak caused dangerous carbon monoxide exposure.

With EDGE Energy, they replaced their gas system with a high-efficiency heat pump and heat pump water heater—completely eliminating their reliance on fossil fuels.

Insulation Tax Credit 2025

Proper insulation can cut heating and cooling costs by up to 30%—and the federal tax credit covers 30% of the cost, up to $1,200. Eligible upgrades include:

Attic, wall, and floor insulation: Improve comfort and reduce energy loss.
Air sealing: Stop drafts and leaks for better efficiency.
Windows & doors: ENERGY STAR®-certified products qualify for an additional credit.
Home energy audits: Find problem areas before making upgrades.

Case study: Insulation incentives help to cut energy bills by 30%

Kadir’s Maryland townhouse had high energy bills and poor insulation.

Through rebates and incentives, EDGE Energy installed air sealing, insulation, and a heat pump—all at no cost to the homeowner.

Now, his home is 21% tighter, and his energy bills dropped by 30%.

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