26 U.S.C. § 25C — Energy efficient home improvement credit

(a) Allowance of credit: You get a credit equal to 30% of the sum of: (1) what you paid for qualified energy efficiency improvements installed that year; (2) what you paid for residential energy property; and (3) what you paid for home energy audits. (b) Limitations: (1) Your total credit for the year can't exceed $1,200. (2) The part of the credit from energy property (subsection (a)(2)) can't exceed $600 per item of qualified energy property. (3) The part from exterior windows and skylights, added together, can't exceed $600. (4) The part from doors can't exceed $250 per door, and $500 total for all doors. (5) Despite the $1,200 and $600 caps, heat pumps, heat pump water heaters, and biomass stoves or boilers together can qualify for up to $2,000 in credit. (6) Home energy audits: (A) the credit for audits is capped at $150; (B) no credit unless you include with your return whatever documentation the Secretary requires. (c) Qualified energy efficiency improvements: (1) This means an "energy efficient building envelope component," if: (A) it's installed in your main U.S. home (as defined for the home-sale exclusion in section 121); (B) you're the first person to use it; and (C) it can reasonably be expected to last at least 5 years. (2) It must meet efficiency standards: (A) windows and skylights need the top Energy Star rating; (B) exterior doors need standard Energy Star certification; (C) other components must meet the international energy code standard in effect 2 years before the component is placed in service. (3) "Building envelope component" means insulation and air sealing material, exterior windows and skylights, and exterior doors. (4) "Dwelling unit" includes a manufactured home that meets federal manufactured-home construction and safety standards. (d) Residential energy property expenditures: (1) This is money you spent on qualified energy property that is (A) installed in your U.S. residence, and (B) newly placed in service by you; it also includes labor costs to prepare, assemble, or install it. (2) "Qualified energy property" includes: (A) an electric or natural gas heat pump water heater, an electric or natural gas heat pump, a central air conditioner, or a natural gas/propane/oil water heater, furnace, or boiler — each must meet the highest efficiency tier set by the Consortium for Energy Efficiency; (B) a biomass stove or boiler that heats your home or its water and has a thermal efficiency rating of at least 75%; (C) an oil furnace or boiler that meets 2021 Energy Star standards and is rated for fuel blends at least 20% "eligible fuel"; (D) an upgrade or replacement of an electrical panel, sub-panel, branch circuits, or feeders, if it follows the National Electric Code, has at least 200-amp capacity, and is installed together with — and to enable use of — qualifying efficiency improvements or energy property. (3) "Eligible fuel" means biodiesel and renewable diesel, second generation biofuel, and certain transportation fuel, each as defined elsewhere in the tax code. (e) Home energy audits: A "home energy audit" is a written report on your main U.S. home that (1) identifies the most significant, cost-effective efficiency improvements and estimates the energy and cost savings for each, and (2) is prepared by an auditor who meets certification requirements the Secretary sets within 365 days of this rule's enactment. (f) Special rules: (1) Certain rules from the related residential clean energy credit (section 25D(e), paragraphs 4 through 8) also apply here, covering things like joint occupancy and housing cooperatives. (2) Joint ownership: (A) an expense doesn't fail to qualify merely because it covers two or more dwelling units; (B) in that case, the credit is figured separately for each dwelling unit's share of the expense. (3) Expenses paid using subsidized energy financing don't count toward the credit. (g) Basis adjustments: If you get this credit for an expense, the increase to your property's tax basis that would otherwise result from that expense is reduced by the amount of the credit. (h) Product identification number requirement: (1) For specified property placed in service after December 31, 2024, no credit is allowed unless: (A) a qualified manufacturer made the item, and (B) you include the item's qualified product identification number on your tax return. (2) That number is the one the manufacturer assigns to the item. (3) A "qualified manufacturer" is one that agrees with the Secretary to: (A) assign a unique identification number to each item it produces; (B) label the item with that number; and (C) periodically report those assigned numbers, and related information, to the Secretary. (4) "Specified property" means qualified energy property, plus the windows/skylights and doors described in subsection (c)(3)(B) and (C). (i) Termination: This section does not apply to property placed in service after December 31, 2025.