Federal Energy Tax Credits Ended in 2025: What Now?

From 2023 through 2025, two federal tax credits made home energy upgrades cheaper. Both have now ended for new work. If a salesperson in 2026 promises "30% back from the IRS" on a heat pump, windows or solar, be skeptical and ask for the specific credit in writing.

What ended

Energy Efficient Home Improvement Credit (25C). This covered qualifying heat pumps, central AC, water heaters, insulation, windows, doors and home energy audits, with annual limits. The IRS says you can claim it for improvements made through December 31, 2025.

Residential Clean Energy Credit (25D). This equaled 30% of the cost of qualified clean energy property such as solar panels, battery storage and geothermal heat pumps. The IRS says it's not available for any property placed in service after December 31, 2025.

If you finished qualifying work in 2025, you may still be able to claim it on your 2025 return. Ask a tax professional.

What this means for project decisions

• The payback math changed. A heat pump or solar system that penciled out with a 30% credit needs another look. Get updated quotes and check utility rebates.
• Don't rush for a credit that no longer exists. Pressure to "sign now before the credit goes away" is outdated.
• Efficiency still pays in Central Texas. Long cooling seasons mean insulation, air sealing, duct repair and properly sized HVAC still lower bills, even without a federal credit.

Incentives that remain

Utility rebates. Austin Energy customers have AC, whole-home efficiency (with 0% financing), heat pump water heater, solar, pool pump and thermostat programs. See our Austin Energy rebates guide. Customers of other utilities should check their own programs. See utility programs outside Austin Energy.

Insurance discounts. Impact-resistant roofing can lower premiums with some insurers. Ask yours. See our roofing guide.

Property tax. Texas has a property tax exemption for certain solar and wind energy devices. Ask your county appraisal district how it applies.

Manufacturer and contractor promotions. These are real but temporary. Compare the full price, not just the discount.

How to evaluate a pitch

Ask:

1. Which incentive, exactly? Get the program name and a link.
2. Who receives it, and when?
3. Is the incentive guaranteed, or contingent on approval?
4. What is the price without the incentive?

Legitimate contractors will answer in writing.

A quick look at payback without the credit

Take a heat pump replacement. Without the federal credit, your savings come from:

• lower operating cost compared with the old system, which is largest when replacing an inefficient or failing unit;
• a utility rebate, if available;
• avoided repair costs on old equipment.

For solar, the main factors are your utility's buyback or net metering terms, your electricity use, roof orientation and shading, and any utility rebate. Austin Energy lists a $4,000 solar rebate with an education-course requirement.

Record-keeping if you claimed a credit in 2025

If you installed qualifying equipment in 2025 and claimed a credit, keep:

• the invoice showing the date placed in service and the cost breakdown;
• the manufacturer's certification statement or product qualification;
• for 25C, any home energy audit report, if applicable;
• IRS Form 5695 as filed.

Keep these with your home records. They also help when you sell, since buyers increasingly ask about efficiency upgrades.

Will credits come back?

Tax law changes. Base project decisions on incentives available now, and treat any future federal program as a bonus. Check the IRS pages before you file.

What still helps with costs in 2026

• Local utility rebates. Austin Energy and other local utilities run rebates for heat pumps, weatherization and solar. See Austin Energy rebates.
• Manufacturer and contractor promotions, especially for HVAC in shoulder seasons.
• Financing programs offered through utilities, such as low-interest loans for efficiency upgrades.