The “One Big Beautiful Bill Act” (H.R. 1), includes expiration dates for many of the tax credits and incentives offered under the Inflation Reduction Act (IRA) of 2022, including the Energy Efficient Home Improvement Tax Credit (25C) and the Residential Clean Energy Tax Credit (25D).

The 25C Energy Efficient Home Improvement Tax Credit offered 30% of the cost of installation of qualified residential energy efficient equipment, up to $1,200. However, each type of improvement had its own limit. For instance, boilers and furnaces, including oil-fired boilers and furnaces, had a maximum credit of $600. These boilers and furnaces must be rated for use with fuel blends containing at least 20% biodiesel or renewable diesel and meet or exceed 2021 ENERGY STAR efficiency criteria; and, as of January 1, 2025, qualifying units must have a manufacturer-provided Product Identification Number (PIN) or QM Code to be included on IRS Form 5695 when filing taxes. The total amount of the installed system may include labor expenses. The IRA offered the 25C credit through 2032, but H.R. 1 repeals the credit as of December 31, 2025.

The 25D Residential Clean Energy Tax Credit encouraged homeowners to invest in “zero-emission” heating and cooling technologies such as qualified solar panels, solar water heaters, fuel cells, residential wind turbines, and geothermal heat pumps, by offering a 30% tax credit through 2032, and annual reductions through 2035 when it expired. With the passage of H.R.1, 25D will not be available after December 31, 2025. Many fuel companies have been combining solar panels with high efficiency heating equipment to help their customers reduce fuel use and expenses, especially as consumers were able to use both credits concurrently.

We recommend that home heating companies actively promote these tax credits over the next six months to take advantage of this incentive while it exists. Your marketing partners can help you determine the best ways to communicate the urgency of upgrading before the credits expire.

The 25C credit can be “stacked” with other incentives, such as NORA efficiency upgrade rebates, which are available through many state and regional trade associations. However, the value of the rebate must be deducted from the purchase price of qualifying systems when reporting total eligible expenses and claiming the 25C tax credit.

To be eligible, installation needs to be completed by December 31, 2025. Homeowners should consult a tax professional for guidance and complete IRS Form 5695 to be included with their annual tax return.

NEFI has produced and distributed a detailed analysis and summary of the provisions in H.R.1 which are most relevant to its members. If you are a NEFI member and have not yet received the summary, or are a non-member interested in joining, please contact NEFI at (617) 924-1000 or email membercom@nefi.com.