Two things changed the arithmetic on home energy work, and neither is a product. The federal credit most homeowners were counting on closed at the end of 2025, and the agency that publishes the upgrade list publishes annual savings rather than payback periods. Put together, that means you now have to work out payback yourself, from your own quote.
This article does that with the numbers EPA actually printed. It does not invent a payback table, because no agency publishes one.
The federal credit is closed
The Energy Efficient Home Improvement Credit, Section 25C, covered 30 percent of qualifying costs for insulation, windows, doors, heat pumps and home energy audits. The IRS states the credit is allowed for qualifying property placed in service before 31 December 2025.
Public Law 119-21, enacted 4 July 2025, terminated it earlier than the Inflation Reduction Act had scheduled. For property placed in service after 31 December 2025 there is no 25C credit. The companion residential clean energy credit, Section 25D, ended on the same date.
Two practical consequences. If you completed qualifying work in 2025 and have not yet filed for that year, the credit is still claimable on that return using IRS Form 5695. And if you are planning work now, any calculator or contractor still quoting you a 30 percent federal credit is working from stale information; ask them to requote without it.
State and utility programmes are now the live path, and they vary by state. Your state energy office and your own utility are the authorities on what remains, not a national article.
The six items on the ENERGY STAR list
The ENERGY STAR Home Upgrade is a defined set of six improvements EPA describes as designed to work together. It is worth knowing the list precisely, because it is a short and specific one, and most of what gets marketed as a home energy upgrade is not on it.
| Measure | What EPA publishes about it |
|---|---|
| Air source heat pump | Heating and cooling is almost half the average household energy bill, more than $900 a year. A certified heat pump is significantly more efficient than a furnace or boiler. |
| Heat pump water heater | The water heater is the second-highest energy user in the home. A certified heat pump model saves about $550 a year for a household of four. |
| Sealed and insulated attic | Nine out of ten US homes are under-insulated. Sealing air leaks and adding attic insulation can save up to 10 percent of annual energy bills. |
| High-performing windows or storm windows | Replacing old, drafty windows with certified windows lowers household energy bills by a national average of 12 percent. |
| Smart thermostat | Families with high energy bills can save about $100 a year. The thermostat itself uses very little energy; its role is controlling the equipment above it. |
| Electric-ready wiring and panel | Not a saving in itself. It is the enabling work that makes the other measures possible later. |
EPA puts the full six-measure upgrade at about $500 a year on average. Note that this is lower than several of the individual figures added together, which is the honest signal that these savings overlap rather than stack.
Working out payback yourself
EPA publishes annual savings. It does not publish payback years, and we are not going to manufacture a table of them, because payback is your quote divided by your saving and neither of those is national.
The method is three steps. Take the installed price from your own written quote, after any state or utility incentive you have actually confirmed. Take the annual saving, either from the EPA figure for that measure or, better, from your own bills. Divide the first by the second.
Round illustrative numbers chosen to show the method, not market prices. A smart thermostat quoted at $250 against the $100 a year figure is a payback around two and a half years, which is short enough that precision hardly matters. A window replacement quoted at $18,000 against 12 percent of a $2,400 annual energy bill, roughly $290 a year, is a payback beyond sixty years. That does not make new windows a bad purchase; it makes energy saving the wrong justification for them.
That contrast is the whole point of doing the arithmetic. The measures cluster into two groups, and the grouping is stable even though the numbers are not.
Short payback: air sealing and attic insulation, and the smart thermostat. Low installed cost against a percentage of the largest line on the bill.
Long payback, bought for other reasons: windows, and to a lesser extent full equipment replacement. These are comfort, noise, condensation and end-of-life replacement decisions that happen to save energy. Judge them as that.
Heat pumps and heat pump water heaters sit in between and depend heavily on what you are replacing and on your local electricity and gas prices. What decides that comparison is covered in our note on heat pump against gas furnace.
The gadgets that do not pay back
Nothing here is a scam. The issue is that these are sold on an energy story that the federal list does not support.
Smart plugs, smart bulbs and energy monitors. Useful, cheap, and not on the ENERGY STAR Home Upgrade list. A monitor tells you where the energy goes; it does not reduce it. Treat the spend as information, not as a saving.
Devices sold as reducing your electricity draw. If a product claims a percentage cut to your bill without changing your equipment, your envelope or your behaviour, ask which of those three it changes. There is no fourth mechanism.
Anything quoted with the 30 percent federal credit in 2026. That is not a gadget problem, it is a stale-quote problem, and it inflates the apparent return by nearly a third.
Having spent eighteen years on the industry side of consumer marketing and lead generation, the pattern I would flag is that the cheapest high-return measure on the list, air sealing an attic, is the one nobody advertises. There is no brand in it and no financing attached to it.
The order to do this in
- Find your actual annual energy spend from twelve months of bills, split between electricity and any fuel. Every percentage on this page needs that number to mean anything.
- Check attic insulation and air sealing first. Nine in ten US homes are under-insulated, and this is the cheapest measure on the list.
- Confirm what your state and utility currently offer, since the federal credit is closed and these programmes are now the incentive.
- Get written quotes and divide by the annual saving. Anything past about fifteen years is being bought for comfort rather than payback.
- Do envelope before equipment. A sealed, insulated house needs smaller equipment, and sizing it before the envelope work locks in an oversized system, which is covered in our note on HVAC sizing.
Questions readers actually ask
Can I still get the 30 percent federal tax credit?
Not for new work. The IRS states the 25C credit is allowed for qualifying property placed in service before 31 December 2025, and Public Law 119-21 terminated it after that date. If you completed qualifying work in 2025 and have not filed for that year, it remains claimable on that return via Form 5695. For 2026 work, state and utility programmes are the remaining path.
Which upgrade has the shortest payback?
No agency publishes payback periods, so this depends on your quote and your bills. Structurally, attic air sealing and insulation and a smart thermostat have the lowest installed cost against a meaningful share of the bill, which is why they tend to come out shortest. Divide your written quote by the annual saving and you will see it for your own house.
Do new windows pay for themselves in energy savings?
Rarely on energy alone. ENERGY STAR puts the saving at a national average of 12 percent of household energy bills, which against a typical installed cost implies a payback measured in decades. Comfort, noise, condensation and end-of-life replacement are the honest reasons to buy them. What actually moves a window bid is covered in our note on window cost drivers.
Will a smart home system cut my bills?
A smart thermostat is on the ENERGY STAR list and EPA puts it at about $100 a year for households with high bills. Smart plugs, bulbs and energy monitors are not on the list. A monitor shows you where energy goes, which is useful, but visibility is not a saving until something changes.
Sources
- Internal Revenue Service, Energy Efficient Home Improvement Credit (accessed 31 August 2026). Credit allowed for qualifying property placed in service on or after 1 January 2023 and before 31 December 2025; claimed on Form 5695.
- Public Law 119-21, enacted 4 July 2025. Terminated the Section 25C credit for property placed in service after 31 December 2025, and the Section 25D residential clean energy credit for expenditures after the same date.
- ENERGY STAR (U.S. EPA), ENERGY STAR Home Upgrade (accessed 31 August 2026). Six-measure set; attic sealing and insulation up to 10 percent of annual energy bills; heat pump water heater about $550 a year for a household of four; certified windows lower household energy bills by a national average of 12 percent.
- ENERGY STAR (U.S. EPA), How to Take Your Home into the Clean Energy Future (accessed 31 August 2026). Full upgrade about $500 a year on average; heating and cooling almost half the annual bill, more than $900; nine out of ten US homes under-insulated; smart thermostat about $100 a year for families with high energy bills.