Home Improvement Tax Credit 2026 vs 2025 | Home Improvement Tax Credit Hub
If you're planning a home upgrade, the home improvement tax credit 2026 vs 2025 comparison matters more than ever. The short answer: the Energy Efficient Home Improvement Credit (25C) stays at 30% for 2026, but the annual cap drops from $1,200 to $600 for most projects. The $2,000 heat pump credit remains unchanged. So while the percentage stays the same, your maximum refund is smaller unless you're installing a heat pump. Below, we break down what changed, what stayed the same, and how to plan your projects to maximize savings.
What Changed from 2025 to 2026?
The biggest shift is the annual cap. In 2025, you could claim up to $1,200 per year for a mix of eligible improvements like insulation, windows, and doors. Starting in 2026, that cap is cut in half to $600. The 30% credit rate remains the same, but your total benefit shrinks.
Another change: the $150 credit for a home energy audit is eliminated in 2026. If you were counting on that, do it in 2025.
Heat pumps are the exception. The $2,000 annual cap for heat pumps and heat pump water heaters stays the same in 2026. That means a qualifying heat pump can still earn you a $2,000 credit, separate from the $600 cap for other improvements.
Finally, the overall lifetime limit of $3,200 per year (from combining the $1,200 and $2,000 caps) becomes $2,600 in 2026. So if you max out both categories, you'll get $2,600 instead of $3,200.
Eligible Projects and Credit Amounts for 2026
Here's what qualifies and how much you can claim in 2026:
- Heat pumps and heat pump water heaters: 30% of cost, up to $2,000 per year.
- Biomass stoves and boilers: 30% of cost, up to $2,000 per year (but this uses the same $2,000 cap as heat pumps).
- Central air conditioners: 30% of cost, up to $600 total (shared with the $600 cap).
- Furnaces and boilers: 30% of cost, up to $600 (shared cap).
- Insulation and air sealing: 30% of cost, up to $600 (shared cap).
- Windows and skylights: 30% of cost, up to $600 (shared cap).
- Exterior doors: 30% of cost, up to $600 (shared cap).
- Electrical panel upgrades: 30% of cost, up to $600 (shared cap), but only if needed for a qualifying improvement.
Remember: the $600 cap is shared across all these categories except heat pumps. So if you spend $2,000 on windows and $1,000 on insulation, you'd only get $600 total, not $900.
How the 2026 Caps Affect Your Planning
Because the $600 cap is shared, you need to prioritize. If you have multiple projects, focus on the ones that give the biggest credit per dollar. Heat pumps are a no-brainer because they have their own $2,000 cap. After that, look at improvements that are necessary for comfort or safety, like insulation or air sealing.
If you're planning a big renovation, consider splitting projects across years. For example, do windows in 2025 (when the cap is $1,200) and a heat pump in 2026. Or if you're reading this in 2025, you still have time to claim the higher cap and the $150 audit credit.
Also, note that the credit is non-refundable. It reduces your tax liability but doesn't give you a refund if you owe nothing. So you need to have enough tax liability to use it. If your credit exceeds what you owe, you can carry it forward to the next year (for the 25C credit, carryforward is allowed).
What Stayed the Same in 2026?
The 30% credit rate is unchanged. The $2,000 cap for heat pumps and heat pump water heaters remains. The list of eligible improvements is the same. The requirement that products meet specific efficiency standards (like SEER2 for ACs or U-factor for windows) is still in place.
You still claim the credit on Form 5695 when you file your taxes. You still need to keep receipts and manufacturer certification statements. And the credit is still available for primary residences only (not rentals).
One thing that didn't change: the credit is not available for new construction. It's for improvements to existing homes.
How to Claim the Home Improvement Tax Credit in 2026
- Buy qualifying products and save your receipts and the manufacturer's certification statement.
- Install them on your primary home (not a rental).
- File Form 5695 with your tax return. You'll list each improvement and calculate the credit.
- Claim the credit on Schedule 3 of your 1040.
If you use a tax software, it will guide you through Form 5695. If you use a preparer, give them all the documentation. The IRS may ask for proof, so keep records for at least three years after you file.
Should You Rush Projects Before 2026?
If you were planning to do windows, doors, insulation, or an energy audit, doing them in 2025 gives you a bigger credit. The $1,200 cap and the $150 audit credit disappear in 2026. So if you can afford it and need the work, 2025 is the better year.
But for heat pumps, there's no rush. The $2,000 cap stays the same. However, if you want to combine a heat pump with other improvements, you might still want to act in 2025 to take advantage of the higher overall cap ($3,200 vs $2,600).
Just don't let the tax tail wag the dog. Only do projects you actually need. The credit is a nice bonus, but it's not worth going into debt for.
Frequently asked questions
Is the home improvement tax credit still available in 2026?
Yes, the Energy Efficient Home Improvement Credit (25C) is available in 2026, but the annual cap for most improvements drops from $1,200 to $600. The $2,000 cap for heat pumps remains.
What is the maximum credit I can get in 2026?
The maximum annual credit in 2026 is $2,600 if you install a qualifying heat pump ($2,000) and other eligible improvements ($600). In 2025, the maximum was $3,200.
Can I claim the credit for a home I rent out?
No, the 25C credit is only for your primary residence. Rental properties do not qualify.
Do I need to itemize to claim the home improvement tax credit?
No, the 25C credit is a non-refundable credit that you can claim whether you itemize or take the standard deduction. You claim it on Form 5695.
What happens if my credit is more than my tax liability?
The credit is non-refundable, so you won't get a refund for the excess. However, you can carry forward any unused portion to the next tax year.
Are there any changes to the heat pump credit in 2026?
No, the heat pump credit remains at 30% of cost, up to $2,000 per year. It has its own separate cap and is not affected by the reduction of the other cap to $600.