Millions of households are making these efficiency upgrades that keep contractors working and thriving
For homeowners, the 25C tax credit is a powerful way to boost comfort and cut energy costs. For contractors, it drives growth, jobs, and year-round demand.
Last year, more than 2.3 million American families used a small but mighty tax credit to upgrade their homes — and gave a major boost to their local contractors in the process.
The Energy Efficient Home Improvement Tax Credit, better known as 25C, is a federal incentive that helps homeowners afford energy-efficient upgrades while fueling business for contractors across the country. The credit covers 30 percent of the cost of qualifying improvements such as heat pumps, insulation, energy-efficient windows, and home energy audits.
In 2023 alone, families claimed more than $2 billion in credits, averaging $880 in tax relief per household. For every dollar homeowners received through 25C, contractors generated ten dollars in energy-efficient product sales. That kind of return is rare in federal policy.
The long-term potential for bill savings is enormous. If every American household upgraded its heating, water heating, and insulation, annual energy bills could drop by more than $55 billion. And individual heating bills could be cut in half.
And the benefits aren’t just financial.
“It is so comfortable up there and so cozy, and I just can’t imagine why we didn’t do something like this sooner,” said Cathy, a Cleveland homeowner who used 25C to help pay for a $14,000 whole-home heat pump system and mini-splits. Upgrades like Cathy’s don’t just lower expenses — they improve quality of life.
For contractors, 25C has become a key driver of business.
“My business got a boost from a bipartisan policy that has been in place since 2005, the 25C Energy Efficient Home Improvement Tax Credit,” said Bradley Stroot, an HVAC contractor based in Indiana. “This credit has helped our business grow and stay busy, even in typically slow seasons, while enabling homeowners to cut their energy bills.”
As demand for energy-efficient upgrades increases, contractors are seeing more stable work, growing revenues, and opportunities to expand their teams. According to the Building Performance Association, nearly 2.3 million jobs are supported by energy-efficient home improvements, many of which are tied to this credit.
Industry leaders have taken notice. Earlier this month, more than 1,100 businesses across the heating, ventilation, air conditioning, refrigeration (HVACR), water heating, insulation, and home performance sectors signed a letter to Congress urging protection for 25C.
“Beyond the pocketbook benefit to homeowners, there are multiple compelling reasons to support the 25C tax credit and make our nation’s homes more energy efficient,” the letter read. “Energy-efficient homes are more resilient in extreme weather; energy-efficient homes are healthier homes; and building energy efficiency enables utilities to better manage demands on the electrical grid.”
The Energy Efficient Home Improvement Tax Credit is set to remain in effect through 2032, providing ample opportunity for homeowners and contractors to benefit from its provisions. As awareness increases and processes are streamlined, there’s no reason that participation rates won’t also rise, leading to greater benefits across the country.
The 25C credit isn’t just a line on a tax return. It’s a bridge between energy affordability and economic growth. It helps families save money, supports local contractors, and contributes to a stronger clean energy workforce. As more Americans invest in comfort, resilience, and efficiency — and more contractors grow to meet that demand — preserving 25C is just common sense.
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