In Part 1 of this series on the Energy Efficient Home Improvement Federal Tax Credit, we gave you an overview of what it is, what’s new in 2025, who qualifies, who doesn’t qualify and what sorts of equipment and units it covers.

Here is a step-by-step, foolproof guide from the IRS (and our friends at RUUD) for exactly how homeowners can apply for this important benefit.

Check eligibility of your home and property.

The home must be:

• Located in the U.S.
• An existing home, not new construction
• Your primary residence
  

The new units must be:

• Central air conditioners
• Natural gas, propane or oil water heaters or furnaces
• Hot water boilers
• Heat pumps
• Biomass stoves and boilers
• There are also provisions for things like new doors, windows and skylights
  

Step 2

Buy the units and get them installed by a qualified professional. This means the homeowner is footing the cost upfront for the units and the installation, with the tax credit benefit to come later.

Find out whether the new units are eligible by visiting Energy Star.

Step 3

Keep the receipts for the units and the installation costs.

Step 4

File Form 5695 with your tax return. This is the form for Residential Energy Credits. File it for the year in which the residential energy property was put into service. So, if the water heater was purchased in 2024 but installed in 2025, it would go on the homeowner’s 2025 taxes.