THE INFLATION REDUCTION ACT

Coming To Terms with IRS 25C

THE INFLATION REDUCTION ACT

25C Residential Energy Efficiency Tax Credit

Timing: New version of 25C starts in 2023; new version of 25D retroactive to all of 2022

Administration: IRS

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THE BIG PICTURE

The 25C and 25D tax credits incentivize household electrification by lowering the total cost of qualified electrification upgrades. 25C provides a capped 30 percent tax credit for heat pumps, heat pump water heaters (HPWHs), qualifying electrical panel upgrades, select weatherization measures, and energy audits. For the first time, air source heat pumps for space heating / cooling and HPWHs will be eligible for a tax credit of up to $2,000 per year, and electrical panel upgrades installed in conjunction with a heat pump or HPWH will be eligible for a tax credit of up to $600.

25D provides an uncapped 30 percent tax credit for rooftop solar, battery storage (for the first time), and geothermal heating. IRS has also allowed 25D to be applied to an electrical panel upgrade as long as it is installed in conjunction with and enables another eligible energy installation

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The details on 25C: heat pumps, heat pump water

heaters, and more…