Federal Energy Tax Credits Are Gone: What It Means for Costs
According to MoneyLion, renovations rarely earn a deduction and the big federal energy credits ended after 2025. Here is what that means for budgets.
If you are planning a home upgrade and counting on a federal tax credit to soften the bill, stop and re-run your budget. The major federal energy credits for homes are over, and ordinary renovation spending almost never reduces your income tax. Use the full price as your planning figure.
What the report says
According to MoneyLion, a CPA it interviewed said that for a personal residence the answer to "can I deduct my renovation?" is "almost always no." Instead, qualifying capital improvements generally raise your home's tax basis, which can shrink the taxable gain when you eventually sell.
The same CPA, as reported by MoneyLion, made these points:
- There is no immediate deduction for renovation costs, and claiming one can amount to tax fraud.
- Keep invoices, permits, contracts and proof of payment. Without records, the IRS may challenge the basis you claim years later.
- Repairs and improvements are treated differently. Repainting a room usually doesn't add to basis, while a new roof generally does. Mixed projects need careful allocation.
- State tax rules don't always mirror federal ones, and investment properties are treated differently from your own home.
- "Energy efficient" no longer means "tax credit." MoneyLion reports that the major federal residential energy credits ended after 2025, though some state incentives may remain.
This is general information, not tax advice. Talk to a tax professional about your own situation.
What it means for your budget
The credits in question are 25C (energy efficient home improvement) and 25D (residential clean energy, including solar and batteries). Per the IRS, 25D doesn't apply to spending after 31 December 2025, and 25C doesn't apply to property placed in service after that date. Anything you start now has to stand on its own price.
Here is how our live cost model puts the biggest energy projects, before sales tax:
| Project | Typical (mid-range) | Usual range |
|---|---|---|
| Ducted heat pump | $14,500 | $11,300 – $18,800 |
| Solar panels | $24,600 | $19,200 – $32,000 |
| Window replacement | $3,300 | $2,600 – $4,300 |
| EV charger | $2,400 | $1,900 – $3,150 |
| Water heater | $1,900 | $1,450 – $2,450 |
Every figure above is the full price with no credit subtracted. Our estimates come from labour hours × local rates plus materials, checked against market prices and real quotes.
Heat pumps and solar
These were the biggest beneficiaries of the old credits. See our guide to Heat pump installation for the cost of ducted, dual-fuel hybrid and ductless multi-zone systems. A hybrid that keeps your gas furnace is often the cheaper way in:
| Material | Typical | Usual range | Lifespan |
|---|---|---|---|
| Ducted air-source heat pump | $14,500 | $11,300 – $18,800 | – |
| Dual-fuel hybrid (keeps gas furnace) | $15,600 | $12,200 – $20,300 | – |
| Ductless multi-zone (whole home) | $23,900 | $18,600 – $31,100 | – |
For solar, a battery is the main swing factor. A 13.5 kWh battery adds to the bill, and without the credit that add-on needs to pay for itself on its own. Our Solar panels guide breaks down each option.
Other places to look for help
- State programs: Some states run IRA home energy rebate programs (HEAR/HOMES). Availability varies by state.
- Utility rebates: Utilities often offer rebates on heat pumps, insulation and EV chargers.
- DSIRE: The DSIRE database lists state and utility incentives, so check it before you sign anything.
Records matter more now
Since the payoff for most work comes at sale time, through basis, paperwork becomes your main financial tool. Keep the contract, permit, invoices and payment proof for each job in one folder. Plumbing, electrical and structural changes usually need a local permit, which also gives you a useful paper trail.
Separate repairs from improvements on mixed invoices. A roof replacement, for instance, is the kind of work the CPA said generally counts toward basis. Our Roof replacement guide shows a typical mid-range job at $8,500.
How to protect your budget
- Plan on the full price. Treat any state or utility rebate as a bonus, not as part of the plan.
- Get several quotes. With no credit to cushion the cost, a gap of a few hundred dollars between bidders matters more.
- Check your quote. Use our "is my quote fair" tool to compare a contractor's number with our live model.
- Ask about rebates before work starts. Utility and state programs often have pre-approval rules.
- Keep your records. File everything the day the job finishes.
Sales tax on materials varies by state, and labor is often not taxed, though rules vary. Our figures are before sales tax, so add your local rate when you budget.