The Federal Credit That Most Homeowners Miss

The Inflation Reduction Act (IRA), signed in 2022 and still in effect through 2032, created one of the most valuable energy efficiency tax incentive programs in decades. For homeowners installing spray foam insulation, the key credit is Section 25C — the Energy Efficient Home Improvement Credit.

Here’s what it covers for insulation:

• Credit amount: 30% of project cost, up to $1,200 per year
• Annual cap: $1,200 per year (can be claimed every year through 2032)
• Qualifying work: Insulation and air sealing materials that meet the International Energy Conservation Code (IECC) standards
• Spray foam qualifies: Both open-cell and closed-cell spray foam insulation qualify when installed in the building envelope (attic, crawl space, walls, rim joists)

How Section 25C Works in Practice

If you spend $5,000 on spray foam insulation for your attic and crawl space, 30% of that ($1,500) would normally be eligible for the credit — but the annual cap of $1,200 means you’d claim $1,200 this year. If you have additional qualifying work done next year, you can claim up to another $1,200 in 2027.

This is a tax credit, not a deduction. It reduces your tax liability dollar-for-dollar. If you owe $3,000 in federal taxes and qualify for $1,200 in Section 25C credits, your tax bill becomes $1,800.

Key requirements:

• The home must be your primary residence (not a rental property)
• The insulation must be new materials meeting current IECC standards
• You must save your receipts and the manufacturer’s certification statement
• File IRS Form 5695 with your tax return for the year the work was done

DTE Energy Home Energy Efficiency Programs / Consumers Energy Energy Efficiency Programs

DTE Energy offers rebates for insulation upgrades through their Home Energy Efficiency program, typically $0.10–$0.20 per square foot for qualifying attic insulation improvements. Consumers Energy has a similar Home Energy Efficiency Rebate program with comparable rebate amounts. A 2,000 sq ft attic project could yield $200–$400 in utility rebates.

Important: utility rebate programs change annually based on utility commission approvals and program funding. Always verify current rebate amounts directly with DTE Energy / Consumers Energy before scheduling work — program details at the time of this writing may have changed.

State Programs in Michigan

Michigan’s Home Heating Credit can interact with energy efficiency improvements for low-income households. Additionally, the Michigan Saves program offers low-interest financing for home energy upgrades. Check with the Michigan Department of Treasury for current-year details.

Can You Stack the Federal Credit and Utility Rebates?

Yes. The federal Section 25C credit and utility rebate programs are generally stackable — you can receive a utility rebate AND claim the federal tax credit on the same project. However, when a utility rebate is received, it may reduce your cost basis for calculating the federal credit. The calculation: federal credit = 30% of (project cost minus any utility rebates received).

Example: $5,000 project – $300 utility rebate = $4,700 cost basis × 30% = $1,410. Since this exceeds the $1,200 annual cap, you’d claim $1,200 in federal credits.

How to Maximize Your Credits

1. Request itemized invoices — keep separate line items for materials vs labor. The Section 25C credit covers qualifying insulation materials (spray foam counts); some interpretations also cover labor. Document everything clearly.
2. Get the manufacturer’s certification — your contractor should be able to provide the manufacturer’s certification statement confirming the product meets IECC standards. This is required for the IRS filing.
3. Time larger projects strategically — if your project cost exceeds $4,000 (yielding $1,200+ in credits), consider splitting large projects across tax years to claim up to $1,200 in multiple years. Consult your tax advisor on this approach.
4. Apply for utility rebates first — the utility rebate application process can take 4-12 weeks. Start the application before or immediately after the project is complete.

A Note on HOMES Act Rebates

The IRA also authorized the HOMES (Home Owner Managing Energy Savings) rebate program and the HEAR (High-Efficiency Electric Home Rebate Act) programs, which would provide point-of-sale rebates at the time of installation. These programs are administered by states and were still rolling out at the time this page was written. Check with the Michigan Energy Office for the current status of these programs in Michigan.

Get a Free Quote with Cost and Credit Estimates

When you request a quote from our network, ask about the Section 25C credit qualification for the specific spray foam products being installed — a good contractor will be familiar with this and should be able to provide the manufacturer documentation you need. The financial case for spray foam in Michigan gets substantially stronger when you factor in the 30% federal credit plus any available utility rebates.

Reach out to get a no-cost estimate for your project. We’ll include line-item material costs so you have everything you need to calculate your credits.