Short answer: federal energy credits are no longer available for property placed in service after December 31, 2025, and California’s rebate programs still exist but many reservations are currently full. We recommend checking with your contractor and a tax professional before signing any contract, and both the IRS and the California Energy Commission publish current eligibility rules worth reviewing first.
TL;DR:
- For federal credits, eligibility depended on installation readiness, not contract or deposit dates; 2025 projects need completion dates, QMID details, and required audit reports.
- As of February 24, 2026, California’s HEEHRA Phase I single family funds were fully reserved statewide, and income verification requests faced a waitlist; check status first.
- California rebates may require a trained, enrolled contractor, and combination rules vary by program and utility; confirm both before including expected savings in your budget.
- Capital improvements like a roof or room addition raise a home’s tax basis; routine repairs do not, so retain permits, itemized invoices, and photos.
- A medically necessary accessibility upgrade may qualify as a medical expense only after subtracting any increase in home value; keep physician support and valuation evidence.
Table of Contents
- What federal credits covered through 2025, and why 2026 looks different
- Where California rebate programs stand and how to pursue them
- Capital improvements vs. repairs: the tax benefit that outlasts any credit
- Medical and accessibility modifications that may be deductible
- Forms, timing, and the paperwork your contractor should hand you
- What we ask contractors to document on every project
- Why documentation matters more than the credit itself
- How we help California homeowners plan tax-aware, rebate-ready remodels
- FAQ
- Sources
What federal credits covered through 2025, and why 2026 looks different
Through the end of 2025, two federal credits shaped how homeowners thought about energy upgrades. The Residential Clean Energy Credit (Section 25D) covered 30% of qualified solar panels, heat pumps, and battery storage systems, with no overall dollar cap. The Energy Efficient Home Improvement Credit (Section 25C) also offered up to 30% back on items like insulation, windows, and efficient furnaces, though it came with annual limits on specific categories.
Both credits ended for property placed in service after December 31, 2025. That phrase, “placed in service,” matters more than when you signed a contract or paid a deposit. It refers to the date equipment is installed and ready for its intended use, and that date determines which tax year, if any, a project could have qualified under.
For homeowners who completed work before the cutoff, or who are untangling a 2025 project that closed out after the new year, a few checkpoints are worth confirming with your contractor and tax preparer:
- Confirm the exact installation completion date in writing, since this is the figure the IRS uses to test eligibility.
- Verify the equipment came from a qualified manufacturer and carried a Qualified Manufacturer ID (QMID), a requirement the IRS introduced for 2025 claims.
- Ask whether your contractor filed or retained the energy audit report required for certain efficiency credits.
Because these federal credits no longer apply to 2026 installations, homeowners planning upgrades this year should treat any contractor marketing that references the old 30% credit with caution and confirm current rules directly with the IRS or a tax professional before finalizing a contract.
Where California rebate programs stand and how to pursue them
California administers two IRA-funded rebate programs through the California Energy Commission: the Home Electrification and Appliance Rebates (HEEHRA) program and the Home Efficiency Rebates (HOMES) program. Both are designed to help households upgrade to electric appliances and efficient systems, and both operate on limited funding that gets reserved as homeowners apply.
As of February 24, 2026, HEEHRA Phase I single-family reservations were fully reserved statewide, and new income verification requests are being placed on a waitlist. That does not mean the programs are closed for good, since funding structures shift and new phases can open, but it does mean homeowners should treat availability as uncertain rather than guaranteed.
If you want to pursue a California rebate, a few concrete steps help:
- Check the Energy Commission’s program portal directly for current reservation status before assuming funds are available.
- Ask any contractor you’re considering whether they are enrolled in HEEHRA or HOMES, since installations often must be performed by a trained, program-enrolled contractor to qualify.
- Join the waitlist if reservations are full in your area, and ask your contractor to flag you if a slot opens.
- Keep every document related to your application, including confirmation emails and reservation numbers, in case you need to prove your place in line.
Rebates can sometimes be combined with other incentives, but the rules vary by program and by utility, so confirm the specifics with your contractor before counting on a particular number.
Capital improvements vs. repairs: the tax benefit that outlasts any credit
While federal credits come and go, one tax benefit tied to renovations does not expire: the increase to your home’s cost basis. The IRS treats basis adjustments as one of the most reliable ways renovations reduce your eventual tax bill, because a higher basis means less taxable capital gain when you sell.
The distinction that matters is between a capital improvement and a repair. A kitchen remodel, a new roof, or a room addition is a capital improvement because it adds value or extends the life of your home. Repainting a wall or fixing a leaky faucet is a repair, and repairs don’t adjust your basis. Publication 530 walks through these distinctions and also confirms that energy-efficiency credits applied only through property placed in service in 2025.
To make sure a capital improvement actually helps you later, keep:
- Permits pulled for the project, since they document scope and official approval.
- Itemized invoices separating labor from materials.
- Before and after photos that support the nature and extent of the work.
- Any energy audit report, since qualified auditors must perform these for projects starting in 2024 or later.
Pro Tip: Store renovation records in the same folder as your closing documents and annual tax returns, so decades from now you’re not reconstructing a 2026 kitchen remodel from memory.
Separately, if you hold a Mortgage Credit Certificate, the credit works alongside the mortgage interest deduction and is unrelated to renovation costs, so don’t confuse the two when calculating potential savings.
Medical and accessibility modifications that may be deductible
Home modifications made for medical necessity can sometimes be deducted as medical expenses, but the rules are narrower than many homeowners expect. IRS Publication 502 covers this category and applies a specific formula: the deductible amount equals the cost of the improvement minus any increase in your home’s value that results from it.
Common qualifying modifications include:
- Wheelchair ramps and widened doorways.
- Grab bars and handrails installed for a medical condition.
- Lowered countertops or modified bathroom fixtures for accessibility.
If a ramp costs money but adds no resale value, since many buyers don’t need one, the full cost may be deductible. If a modification also happens to increase your home’s market value, only the portion exceeding that value increase typically qualifies.
Because this calculation requires a value comparison, homeowners should keep a written statement from a physician establishing medical necessity, along with an appraisal or professional opinion on how much (if any) value the improvement added. The IRS capital expense worksheet for medical improvements is the document to complete and retain, alongside receipts and the valuation evidence that supports your numbers if the deduction is ever questioned.
Forms, timing, and the paperwork your contractor should hand you
Claiming any of these benefits comes down to the right forms filed in the right tax year, supported by documentation your contractor should be providing as a matter of course.
The relevant forms include:
- Form 5695 for residential energy credits, used for any project that was placed in service through 2025.
- Form 8396 for the Mortgage Credit Certificate, separate from renovation-related credits.
- Schedule A, along with the capital expense worksheet, for medical home modification deductions and basis adjustments.
Timing hinges on the “placed in service” date, which is when equipment is installed and operational, not when you signed the contract or made a deposit. A project that started in late 2025 but finished installation in January 2026 falls outside the window for the now-expired federal credits.
Contractors who separate line items for materials, labor, and installation, and who track qualified manufacturer IDs for eligible equipment, substantially reduce the friction homeowners face when claiming credits or documenting basis adjustments later. Ask for an itemized invoice, QMID information where applicable, any energy audit report, copies of permits, before and after photos, and written confirmation of any state rebate reservation. Projects involving door or window replacements can also affect energy performance; a recent look at interior door upgrades outlines how these details factor into a home’s overall efficiency profile.
What we ask contractors to document on every project
Clear documentation protects you long after a project wraps, which is why we build it into how we manage every remodel. On projects where tax or rebate eligibility might matter, we provide itemized invoices that separate labor from materials, full permit packets, and certification or QMID information when equipment qualifies for it, and we coordinate directly with energy auditors when a project calls for one.
Before you sign with any contractor, ask these questions:
- Is the proposed equipment from a qualified manufacturer, and will you provide that documentation?
- Are you enrolled in any state rebate program relevant to this project?
- What is the expected placed-in-service date, in writing?
- Will I receive a complete paper trail, including permits and photos, at project close?
A straight answer to each of these tells you a lot about how a contractor operates.
Why documentation matters more than the credit itself
Federal energy credits made headlines for years, but they were always temporary, and their expiration after 2025 proves the point. What doesn’t expire is the paper trail a well-documented renovation leaves behind: the permits, the itemized invoices, the photos, the adjusted basis that reduces your tax bill decades from now when you sell.
Homeowners chasing the next rebate program or waitlist often overlook this. California’s HEEHRA and HOMES programs are worth pursuing, but they’re also finite and currently constrained, so building a renovation plan around rebate uncertainty is a weaker strategy than building one around documentation that protects you regardless of which programs are open in a given year.
Our view: prioritize the paperwork first. Ask every contractor what records they’ll hand you before you ask what rebate they can get you. The records outlast the program.
— David S.
How we help California homeowners plan tax-aware, rebate-ready remodels
Kitchen and bathroom remodels, ADUs, and complete home remodeling projects all involve decisions that affect your paperwork long after the crew leaves. We handle permitting and project management as part of our jobs, which means the documentation trail, including permits, itemized invoices, and photos, is built in rather than assembled after the fact.
When a project calls for a rebate-certified or TECH-enrolled contractor for a specific system, we coordinate that piece directly to help avoid managing multiple vendors on your own. If you’re planning a kitchen remodel, a full home remodel, or an ADU that might affect your home’s basis or qualify for a current incentive, schedule a consultation with our team and ask us for the documentation checklist before work begins.
This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.
FAQ
What are the tax deductions for home improvements in California?
Most home improvements aren’t directly deductible, but capital improvements increase your home’s cost basis, which reduces taxable capital gains when you sell, as explained in IRS Publication 530. Medically necessary modifications may also be partially deductible as medical expenses under separate rules.
Does everyone get a $3,000 tax refund?
No, there is no universal tax refund amount tied to home renovations. Refund amounts depend entirely on your individual tax situation, including income, withholding, and which credits or deductions you actually qualify to claim.
What are the most overlooked tax deductions for renovations?
Homeowners frequently overlook documenting capital improvements that raise their home’s cost basis, since this benefit only shows up years later at sale. Medical modification deductions and mortgage credit certificates are also commonly missed because they require specific forms and worksheets most people don’t know to use.
How does the home improvement tax credit work now that it has changed?
As of late 2025, the federal Energy Efficient Home Improvement Credit no longer applies to property placed in service after December 31, 2025, according to the IRS. Homeowners with projects completed in 2025 may still be eligible to file for that tax year, but 2026 installations do not qualify under the expired rule.
Sources
- Energy Efficient Home Improvement Credit | Internal Revenue Service
- FAQ: IRA residential energy rebate programs | California Energy Commission
