Tax Incentives - Residential | Alliance to Save Energy

Tax Incentives - Residential

Built Environment

A lot of energy consumption happens indoors, making buildings an important target for energy efficiency. And the energy efficiency toolkit is getting smarter: emerging innovations around building systems and grid-interactive technologies are combining with proven solutions like high-efficiency windows and insulation to make the promise of decarbonization a reality in the buildings sector. But to get there, we need to do more to push energy efficiency into the market.


Tax Incentives

Successful implementation of the energy efficiency tax incentives will be essential to reducing climate impact and energy demand in the built environment. As such, the Alliance to Save Energy took the lead in early IRA development to ensure that homeowners received sufficient incentives to make energy efficiency investments through 25C of the Internal Revenue Code. Joined by nearly 1,020 signers, the Alliance urged policymakers to amend and increase the 25C tax credit from its 10% and $500 lifetime limit to an annual limit three times that amount. In the end, policymakers settled on a new 25C, similar to the Alliance’s original ask. The new 25C includes the following through December 31, 2032:

  • 30% of the purchase value which could include labor costs in most cases.
  • $1,200 annual credit allowance that can be increased to $3,200 when purchasing electric and natural gas heat pumps, heat pump water heaters, and biomass stoves and boilers.
  • Up to $2,000 for electric and natural gas heat pumps, heat pump water heaters, and biomass stoves and boilers.
  • Up to $1,200 for insulation.
  • Up to $600 for Energy Star Most Efficient windows; $250 for external doors and $500 in the aggregate; and
  • Additional allowances for panel upgrades (30% of cost at limits) and energy audits (up to $150).

45L is the other energy efficiency tax incentive targeting the residential built environment, but with a focus on new construction and substantial rehabs. The 45L tax credit targets developers, and provides the following per qualifying unit:

  • $2,500: Single-Family meeting Energy Star requirements.
  • $5,000: Single-Family meeting Zero Energy requirements.
  • $500: Multi-Family meeting Energy Star requirements, plus $2,500 Bonus Credit when meeting prevailing wage requirements.
  • $1,000: Multi-Family meeting Zero Energy requirement, plus $5,000 Bonus Credit when meeting prevailing wage requirements.




Help the Alliance advocate for policies to use energy more efficiently – supporting job creation, reduced emissions, and lower costs. Contact your member of Congress.


Energy efficiency is smart, nonpartisan, and practical. So are we. Our strength comes from an unparalleled group of Alliance Associates working collaboratively under the Alliance umbrella to pave the way for energy efficiency gains.


The power of efficiency is in your hands. Supporting the Alliance means supporting a vision for using energy more productively to achieve economic growth, a cleaner environment, and greater energy security, affordability, and reliability.