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IRS Form 5695 Instructions for 2025 – If you’re a homeowner who made energy-efficient upgrades in 2025, you may qualify for valuable tax credits through IRS Form 5695. This form allows you to claim the Residential Clean Energy Credits and the Energy Efficient Home Improvement Credit. Importantly, 2025 is the final year to claim these credits for new expenditures or installations, as both terminate after December 31, 2025.
Form 5695 is attached to your Form 1040, 1040-SR, or 1040-NR. Understanding the 2025 instructions can help maximize your savings on qualified home improvements.
What’s New for Tax Year 2025?
The IRS introduced several updates for 2025:
- Both credits end for expenditures or property placed in service after December 31, 2025.
- Qualified Manufacturer Identification Numbers (QMID) are now required for many items under the Energy Efficient Home Improvement Credit.
- New checkboxes and lines for condominium/cooperative owners and enabling property relationships.
- Home energy audits require certification by a Qualified Home Energy Auditor.
Act quickly—2025 installations are your last opportunity for these incentives.
Residential Clean Energy Credit (Part I of Form 5695)
The Residential Clean Energy Credit provides a 30% credit on costs for installing clean energy property in your U.S. home. This applies to both main homes and second homes (except fuel cell property, limited to main homes).
Eligible Properties and Costs
Qualified items include:
- Solar electric panels and solar water heating property
- Small wind energy property
- Geothermal heat pumps
- Battery storage technology (≥3 kWh capacity)
- Fuel cell property (limited, main home only)
Costs cover equipment, labor for installation, piping, and wiring. Solar roofing tiles that serve structural functions qualify.
Examples of qualified solar panel installations and home battery storage systems.
Credit Limits
- 30% of qualified costs (no overall dollar limit except for fuel cells: $500 per 0.5 kW capacity).
- Unused credit carries forward to future years (though limited post-2025 availability).
Energy Efficient Home Improvement Credit (Part II of Form 5695)
This credit offers 30% on qualified energy efficiency improvements to your main home (existing homes only, not new construction). The maximum annual credit can reach up to $3,200 ($1,200 general + $2,000 for certain heat pumps/biomass).
Qualified Improvements
- Building envelope components: Insulation, air sealing, Energy Star exterior doors ($250/door, $500 total), windows/skylights ($600 total).
- Residential energy property: Heat pumps, heat pump water heaters, central air conditioners, furnaces, water heaters, biomass stoves/boilers (various $600 limits), electrical panel upgrades.
- Home energy audits: Up to $150.
Labor costs qualify for most items except envelope components. QMID required for 2025 installations on specified property.
Qualified heat pump installations, Energy Star windows/doors, and a home energy audit in progress.
Annual Limits
- $1,200 overall for most improvements (with sub-limits).
- $2,000 separate for heat pumps, heat pump water heaters, and biomass items.
- No lifetime limit—claim annually through 2025.
How to Complete Form 5695?
- Complete Part I for clean energy credits (lines 1–16).
- Complete Part II for home improvement credits (lines 17–32).
- Transfer totals to your tax return.
- Attach statements for multiple homes, joint occupancy allocations, or additional items.
Keep manufacturer certifications, audit reports, and QMIDs—do not attach unless requested.
Important Reminders
- Subtract rebates or subsidies from costs.
- Special rules apply for joint occupants and condos.
- Credits are nonrefundable (reduce tax liability but no refund if exceeding it).
- Consult a tax professional for your situation.
Download the latest Form 5695 and instructions. With 2025 marking the end of these credits, review your 2025 upgrades now to ensure you claim what’s available.