Spray Foam Tax Credits in 2026: What Homeowners Need to Know

For years, the federal Energy Efficient Home Improvement Credit paid homeowners back up to $1,200 for insulation upgrades. That credit ended for installations completed after December 31, 2025. Here's what changed, how to claim a 2025 installation on your tax return, and the savings still available for 2026 projects.

What Changed

The Energy Efficient Home Improvement Credit (Section 25C of the Internal Revenue Code) was expanded by the Inflation Reduction Act and originally scheduled to run through 2032. It offered a nonrefundable credit of 30% of qualifying insulation costs, capped at $1,200 per year. Federal legislation enacted in July 2025 ended the credit early: it now applies only to qualifying improvements placed in service on or before December 31, 2025.

Installed in 2025? You Can Still Claim It

If your spray foam project was completed in 2025 and you haven't filed for the credit yet, you may still be able to claim it on your 2025 federal return. The 2025 eligibility rules were:

• Installed in an existing home (not new construction) that is your primary residence; rentals, second homes, and vacation homes did not qualify
• Insulation meeting the International Energy Conservation Code (IECC) criteria in effect two years prior to installation
• Expected to remain in use for at least five years

To claim it: keep your contractor's invoice, get the manufacturer's certification statement from your installer (ThermoSeal provides this documentation for certified installations), and file IRS Form 5695 with your 2025 return. Consult a tax professional to confirm your eligibility, especially if you've already filed.

What Savings Are Still Available in 2026?

The federal credit is gone, but it was never the biggest number in the equation. Three sources of savings remain:

• State and utility incentives. Many states and utility companies offer their own rebates for insulation and air sealing, independent of the federal program. The Database of State Incentives for Renewables and Efficiency (DSIRE) lists incentives by state and utility. Ask your energy provider what they offer before you start your project.
• State-run home energy rebate programs. Some states launched home energy rebate programs with previously allocated federal funding. Availability varies by state; check your state energy office.
• The energy savings themselves. This was always the main event: spray foam typically cuts heating and cooling costs by 30–50%, which pays back the project in roughly 3–5 years and keeps saving for the life of the building. Results vary by climate, home size, and existing insulation.

What About Commercial Buildings?

Commercial projects use a different incentive: the Section 179D Energy Efficient Commercial Buildings Deduction. The same 2025 legislation also set an end date for 179D tied to construction start dates, so eligibility in 2026 depends on your project's timeline. A tax professional familiar with commercial energy incentives can determine whether a specific project still qualifies.

The Bottom Line

The federal insulation tax credit is over for new 2026 installations, but the case for spray foam never rested on it. A 30–50% cut in heating and cooling costs, a 3–5 year typical payback, and a lifetime of savings stand entirely on their own, and state or utility rebates can still sweeten the math where you live.

If you insulated in 2025, don't leave the credit unclaimed. And for a 2026 project, a certified ThermoSeal installer can point you to the incentives active in your area.