Wealth Planning Commentary – September 29, 2025

A Window of Opportunity: Home Energy Tax Credits Are Expiring Soon 

The end of the year is fast approaching, and with it, a significant opportunity for homeowners is set to expire. The One Big Beautiful Bill Act has accelerated the termination of several federal home-energy tax credits, meaning that 2025 is the last chance for many of you to claim these valuable savings.  

What Can You Save On? 

This is your final opportunity to utilize two key credits that can substantially offset the cost of home improvements. Unlike tax deductions, which reduce your taxable income, these tax credits directly reduce the amount of tax you owe, providing a dollar-for-dollar reduction of your tax bill. 

Energy Efficient Home Improvement Credit: This is for smaller, targeted upgrades to your home's energy efficiency. You can claim up to $1,200 annually for improvements like new insulation, exterior doors ($250 per door, up to $500 total), windows ($600 total), and certain furnaces or boilers. Additionally, a separate annual credit of up to $2,000 is available for installing heat pumps or biomass stoves. This means you could potentially save up to $3,200 total in a single year. 

Residential Clean Energy Credit: This credit is for bigger, more transformative projects involving renewable energy. It offers a 30% tax credit on the total cost of installation, with no annual or lifetime dollar limit (except for fuel cells). This includes projects such as: 

• Solar panels and solar water heaters. 
• Geothermal heat pumps. 
• Wind turbines. 
• Battery storage systems (3+ kWh capacity). 

For a typical residential solar-panel system, which can cost around $25,000, this credit could save you $7,500 on your taxes. If the credit amount is more than your tax liability for the year, you can carry the unused portion forward to future tax years. 

Why You Must Act Fast 

To be eligible for these credits, projects must be fully installed and "placed in service" by December 31, 2025. This isn't a matter of simply purchasing the equipment; the work must be completed. For larger projects, such as solar panel installation, careful planning is required. Finding qualified contractors and scheduling the job can be time-consuming, especially during periods of high demand. A delay could mean missing out on thousands of dollars in savings. 

Another consideration is that state and utility incentives, while beneficial, can sometimes reduce the amount of your federal tax credit. We recommend consulting your accountant for specific details.

Here’s an approach to taking advantage of these tax incentives: 

1. What are your objectives? Do you have any home improvement projects in mind? Have you considered a shift toward cleaner energy? Now is the time to evaluate if these tax credits align with your long-term financial and personal goals. 
2. Get a Home Energy Audit: If you're unsure where to start, a professional home energy audit can help you prioritize the most impactful improvements. The audit itself is eligible for a $150 tax credit, making it a low-cost way to get a clear roadmap. 
3. Start the Conversation Now: Talk to qualified contractors immediately. We can help you assess the financial implications of a project, and a reputable contractor can provide a realistic timeline for completion before the year-end deadline. 
4. Keep Meticulous Records: Once you've decided on a project, keep all your invoices, receipts, and documentation. You will need them to properly file for the credit on IRS Form 5695 with your 2025 tax return. 

While these credits may not be suitable for everyone, for those considering a home upgrade, the financial benefits are substantial. We recommend confirming how any specific credits will impact your tax return with your accountant. Please reach out to us to discuss how these expiring tax credits can fit into your comprehensive wealth plan.