Spray foam insulation is one of the most effective ways to cut energy use in a home or building. For several years it also came with a federal tax credit — and that is the part homeowners most often ask about, because the rules changed recently.
The short answer: the federal Energy Efficient Home Improvement Credit (Section 25C) was ended by legislation signed in July 2025. It no longer applies to property placed in service after 31 December 2025. If your insulation work was completed in 2025 or earlier, you may still be able to claim it on the return for that year. For work done today, the savings come from lower energy bills and from state or utility programmes rather than from a federal credit.
What the Federal 25C Credit Covered
This section matters if you completed qualifying work in 2025 or an earlier year and have not yet claimed it. The rules that applied were:
- 30% of the cost of qualifying materials, claimed in the year the work was placed in service.
- A $1,200 annual cap covering building-envelope items as a group — insulation and air sealing fall in this category. This was an annual limit that reset each year, not a lifetime limit.
- Materials only. For insulation and air sealing, labour and installation costs did not qualify — only the product itself. This is one reason DIY kits were popular: the material was the eligible portion either way.
- The product had to meet IECC standards (International Energy Conservation Code) in force at the relevant time.
- Claimed on IRS Form 5695, filed with your return for the year the work was completed.
- Non-refundable. It reduced tax owed; it could not create a refund beyond that.
A Common Misconception: Energy Star Does Not Certify Insulation
You will often see the claim that insulation must be "Energy Star certified" to qualify. That is not correct. Energy Star certifies appliances, windows, HVAC equipment and whole homes — it does not run a certification programme for insulation products. For the 25C credit, insulation qualified by meeting the applicable IECC standard, not by carrying an Energy Star label. If a supplier tells you their foam is "Energy Star certified insulation", treat it as a marketing claim rather than a certification.
What Still Saves You Money
The federal credit is gone for new work, but it was never the main financial argument for insulating. Three things still are:
1. Lower energy bills
According to the U.S. Department of Energy, air leaks account for up to 30% of a typical home's heating and cooling costs. Because spray foam seals as well as insulates, it addresses that loss directly rather than only slowing heat transfer the way batt insulation does. That saving repeats every year for the life of the installation.
2. State and utility programmes
Many states, municipalities and utility companies run their own rebate or incentive schemes for insulation and weatherisation, and these are entirely separate from the federal credit. Terms vary widely by location, so check your own state energy office and your utility provider directly — some offer straightforward rebates on materials, others require a pre- or post-work energy audit.
3. Removing the labour cost
Professional spray foam installation typically runs $1.50–$3.50 per square foot, and most of that figure is crew time and equipment rather than material. A DIY kit removes that portion entirely. For a detailed breakdown, see our guide to the cost of spray foam insulation.
Open-Cell vs Closed-Cell: Which You Need
Both types create an air seal; the difference is density and moisture behaviour.
- Open-cell foam is softer and more flexible, with a lower R-value per inch. It suits interior walls and ceilings, and it performs well for sound control.
- Closed-cell foam is denser and rigid, delivers roughly R-5.66 per inch, and acts as its own vapour barrier. It suits basements, roofs, exteriors and anywhere moisture is a concern.
Why Insulate at All
- Energy efficiency — an airtight seal removes drafts and cuts heating and cooling load.
- Sound control — open-cell foam is effective for bedrooms, home theatres and offices.
- Moisture resistance — closed-cell foam suits damp basements and crawl spaces.
- Durability — properly applied foam does not sag or settle the way loose or batt insulation can.
- Property value — documented efficiency upgrades are a genuine selling point.
Frequently Asked Questions
Can I still claim a federal tax credit for spray foam insulation?
Not for work placed in service after 31 December 2025. The 25C credit was terminated by legislation signed in July 2025. Work completed in 2025 or earlier may still be claimable on the return for that year — confirm with a tax professional.
Did the credit cover installation labour?
No. For insulation and air sealing, only the cost of the materials qualified. Labour was excluded, which is different from some other categories under the same credit.
What was the maximum I could claim?
Building-envelope improvements, including insulation, fell under a $1,200 annual cap. The credit was 30% of qualifying material cost up to that ceiling.
Does my insulation need to be Energy Star certified?
No — Energy Star does not certify insulation products. Qualification was based on meeting the applicable IECC standard.
How much can spray foam actually cut my energy bills?
It depends on how leaky the building was to begin with. The Department of Energy attributes up to 30% of heating and cooling costs to air leaks, so a well-sealed envelope addresses a substantial share of that. Claims of a guaranteed 50% saving are not realistic for most homes.
Are there other incentives available?
Often yes, at state, municipal or utility level. These are independent of the federal credit and vary considerably by location, so check locally.
Before You File
Tax rules change, and they change more often than most homeowners expect. This article is general information, not tax advice, and it reflects the position as of its publication date. Before claiming anything, confirm the current rules with a qualified tax professional or check the IRS guidance for the year in question.
Whatever happens with incentives, the energy saving is the part that does not expire. If you are ready to start, see the ixirpro Spray Foam Insulation Kit.