Virginia Tax Incentives and Credits to be Aware of When Remodeling

Published on 
January 13, 2026
January 13, 2026

If you're remodeling your home in Virginia, you could save thousands by taking advantage of tax incentives and credits. These programs focus on energy efficiency, historic preservation, and accessibility improvements. Here’s a quick overview:

To qualify, plan carefully, document everything, and submit required forms on time. Combining these programs can help you significantly reduce remodeling costs.

Disclaimer: The information provided in this article is for general informational purposes only and is not intended as tax, legal, or financial advice. Tax laws, incentive programs, and eligibility requirements are subject to change and may vary based on individual circumstances. Lane Homes & Remodeling does not provide tax or legal advice. Homeowners should consult a qualified tax professional, accountant, or attorney to determine eligibility and confirm how these incentives apply to their specific situation.

Virginia Remodeling Tax Credits and Incentives Comparison Chart
 Virginia Remodeling Tax Credits and Incentives Comparison Chart

Federal Tax Incentives for Remodeling Projects

Federal tax credits can significantly boost your savings on remodeling projects, complementing state-level incentives. The federal government offers two primary programs: one for energy-efficient upgrades (Section 25C) and another for renewable energy installations (Section 25D). Together, these programs create opportunities for substantial cost reductions.

Energy Efficient Home Improvement Credit

Section 25C provides a 30% tax credit for qualifying energy-efficient home improvements, with an annual cap of $1,200. Eligible upgrades include insulation, air sealing, central air conditioners, furnaces, and boilers. However, specific items have their own limits: windows and skylights are capped at $600 total, while exterior doors are limited to $250 each (up to $500 total). Heat pumps, heat pump water heaters, and biomass stoves are eligible for a separate annual credit of up to $2,000 [5].

Labor costs are treated differently depending on the type of improvement. For instance, labor costs for HVAC equipment are included in the credit calculation, but labor for windows, doors, and insulation is not. For example, if you install a heat pump system for $6,000 (including labor), the entire amount qualifies for the 30% credit, up to the $2,000 cap. On the other hand, if you replace windows for $3,000, including $500 in labor costs, only the $2,500 spent on materials qualifies for the credit [5].

Beginning with 2025 tax filings, taxpayers must report a Qualified Manufacturer Identification Number (QMID) for most energy-efficient products. Additionally, a home energy audit can earn you up to a $150 credit. Since the credit is capped annually rather than over a lifetime, you can spread out multiple upgrades across different tax years to maximize your benefits [5].

Residential Clean Energy Credit

For renewable energy projects, Section 25D offers a separate, more flexible credit. It provides a 30% tax credit for renewable energy systems, with no annual limit and the option to carry forward unused credits. This credit applies to both primary and secondary residences (with fuel cell property limited to primary residences) and covers the full cost, including labor, for systems such as solar panels, wind turbines, geothermal heat pumps, and battery storage systems. To qualify, battery storage systems must have a capacity of at least 3 kilowatt hours [6].

For example, installing a $25,000 solar panel system would result in a $7,500 tax credit. The 30% rate is locked in through 2032, after which it will decrease to 26% in 2033 and 22% in 2034 [6].

To claim these credits, use IRS Form 5695 and keep detailed records, including receipts, manufacturer certifications, and installation documents [6][7]. When combined with state-level programs, these federal credits provide a comprehensive way to offset remodeling costs while improving energy efficiency and sustainability.

Virginia Tax Incentives and Credits

Virginia provides several tax incentives to help homeowners save on remodeling costs, focusing on energy efficiency, accessibility, and historic preservation.

Virginia Energy Efficient Home Improvement Incentives

While Virginia doesn’t offer a statewide tax credit for energy-efficient upgrades, Richmond homeowners can still offset upgrade costs through a mix of utility rebates and federal incentives (see Virginia Energy Sense for a full overview of what’s available across the state) [3].

In the Richmond metro, Dominion Energy is the primary source of electric incentives for most homes. Dominion’s Save Energy & Money programs include opportunities to save on energy-efficient products and upgrades and to participate in energy-saving initiatives that lower both bills and consumption. Richmond customers can access rebates and discounts on ENERGY STAR®-rated products like smart thermostats, LED lighting, spray-foam insulation, dehumidifiers, and other efficiency-boosting items through Dominion’s online savings store and appliance rebate offerings. Dominion Energy

Dominion also offers free home energy assessments that help identify which upgrades make the most sense for your home — from insulation and duct sealing to HVAC improvements — and can unlock additional rebates or incentives once measures are installed. Dominion’s Income and Age Qualifying Program provides no-cost energy assessments and select energy-saving installations for qualifying customers. Dominion Energy

For homes heated with natural gas, Washington Gas and Virginia Natural Gas both offer equipment rebates for efficient systems. Washington Gas provides rebates on ENERGY STAR® smart thermostats ($100), furnace and boiler tune-ups ($100), and dual-fuel heat pump installations (approximately $2,000–$2,600) when installed by a licensed contractor in its Home Energy Savings Network. Virginia Energy Sense

Virginia Natural Gas offers rebates on high-efficiency furnaces (ranging from about $300 to $500 depending on efficiency level) and tankless water heaters ($150–$300), as well as smaller incentives for ENERGY STAR smart thermostats ($50) and free energy-savings kits to help cut waste around the home. Virginia Energy Sense

To qualify for these utility incentives, your home generally must be within the respective utility’s service area, and many rebates require that the equipment be installed by a licensed or program-approved contractor — for example, Washington Gas rebates are processed through its participating contractor network. Virginia Energy Sense

Many of these utility programs also complement federal tax credits (such as expanded credits for heat pumps and insulation under the Inflation Reduction Act) that can further reduce out-of-pocket costs — so we recommend checking both your utility’s offerings and federal opportunities when planning your project [3].

Next, let’s look at how Virginia supports accessibility and aging-in-place improvements with its Livable Home Tax Credit.

Program Availability Notice: Utility rebates, tax credits, and incentive programs are administered by third parties and may change, expire, or be limited by funding availability. Lane Homes & Remodeling cannot guarantee program availability or approval. Homeowners are encouraged to verify current requirements directly with utility providers, government agencies, or tax professionals before proceeding.

Virginia Livable Home Tax Credit

The Virginia Livable Home Tax Credit (LHTC) helps homeowners offset the cost of accessibility improvements. It covers 50% of retrofitting costs, up to $6,500 [8]. Qualifying upgrades include entry ramps, widened doorways, accessible bathrooms, and other modifications aimed at making homes more universally accessible.


"The Virginia Livable Home Tax Credit (LHTC) program is designed to improve accessibility and universal visitability in Virginia's residential units." - Virginia Department of Housing and Community Development [8]

The program has an annual funding cap of $2 million, and if applications exceed this limit, credits are distributed proportionally among applicants [8]. To maximize your chances of securing the full credit, submit your application early in the tax year. If the credit exceeds your tax liability, you can carry it forward for up to 7 years [8]. Both homeowners and licensed contractors can apply for this credit [8].

For homeowners with historic properties, Virginia provides additional incentives to preserve and rehabilitate these structures.

Virginia Historic Rehabilitation Tax Credit

Virginia encourages the preservation of historic properties through a 25% tax credit for rehabilitating certified historic structures [2]. Unlike the federal historic tax credit, which is limited to income-generating properties, Virginia’s program also applies to owner-occupied residential homes [2] [9] . Since its inception in 1997, the program has awarded $1.7 billion in tax credits, driving approximately $6.8 billion in private investment [2].

To qualify, your property must be listed on the Virginia Landmarks Register, the National Register, or be a contributing structure in a historic district [2] [9]. For owner-occupied homes, rehabilitation costs must equal at least 25% of the building’s assessed value [2] [9]. Eligible expenses include structural repairs, HVAC systems, plumbing and electrical work, kitchen and bathroom renovations, and architectural fees. However, costs like property acquisition, new additions, appliances, and most landscaping are not covered [2].

The application process involves three steps: evaluating the property’s significance, describing the planned work, and obtaining certification for the completed project. Be sure to take detailed “before” photos - failure to document the property’s original condition can disqualify your project [2]. After the work is complete, a Certified Public Accountant (CPA) must review the expenses and submit a financial report [2] [4]. Unused credits can be carried forward for 10 years, and there’s a $5 million cap on credits a single taxpayer can claim in one year [2] [9].

Historic Property Disclaimer: Historic tax credits require strict compliance with state and federal preservation standards. Any deviation from approved plans or required documentation may result in partial or complete disqualification. Lane Homes & Remodeling can assist with planning and documentation but cannot guarantee tax credit approval.

How to Use Tax Incentives in Your Remodeling Plan

Timing Your Remodeling Activities for Maximum Benefit

Timing your remodeling projects wisely can help you make the most of available tax incentives. For example, the federal Energy Efficient Home Improvement Credit has an annual cap of $3,200 [1]. To maximize savings, consider spreading energy-efficient upgrades across multiple tax years. You could install a heat pump (eligible for up to $2,000 in credits) one year, and then tackle upgrades like windows, doors, and insulation (eligible for up to $1,200 in credits) the following year [1].

If you're working on a historic property, Virginia's Historic Rehabilitation Tax Credit requires you to meet the "material rehabilitation" test within a 24-month window. However, with an approved phasing plan, this timeline can be extended to 60 months [2].

Keep in mind that equipment must be fully installed and operational by December 31 to qualify for that year's tax credit [10]. Additionally, utility rebate programs often have tight deadlines. For instance, Virginia Natural Gas requires rebate applications to be submitted within 90 days of installation [11]. By aligning your upgrades with these deadlines, you can ensure eligibility for both tax credits and utility rebates.

Planning for Energy Efficiency, Accessibility, and Preservation

Once you've timed your projects, proper planning can help you maximize savings by combining multiple programs. Start with a professional home energy audit, which not only qualifies for a $150 federal credit[1] but also identifies the most impactful upgrades for your home. This audit can act as a guide for layering federal energy credits, state incentives, and utility rebates.

For historic homes, balancing preservation requirements with modern efficiency is key. Virginia's Historic Rehabilitation Tax Credit covers upgrades like HVAC systems and structural work but excludes solar and geothermal installations [2]. However, these renewable energy systems might qualify for federal credits under different programs. Keeping track of these expenses separately ensures you don’t miss out on eligible incentives.

How Lane Homes & Remodeling Can Help

Managing multiple tax incentive programs can feel like navigating a maze. That’s where Lane Homes & Remodeling steps in. Their integrated design-build approach handles everything from design and construction to compliance, all under one roof. Their in-house architectural drafting team ensures your plans meet the Secretary of the Interior's Standards for Rehabilitation (required for historic tax credits) while also incorporating modern energy efficiency standards.

Conclusion: Maximizing Savings Through Tax Incentives

To make your Virginia remodeling project more affordable, taking full advantage of tax incentives is essential. Both state and federal programs can significantly offset costs. For example, federal energy credits can refund up to 30% on qualifying upgrades, while Virginia's 25% historic rehabilitation credit provides substantial savings. On top of that, utility rebates from companies like Virginia Natural Gas and Dominion Energy can further reduce expenses.

The secret to benefiting from these incentives lies in careful planning and thorough documentation. Start by verifying your property's eligibility early and keeping detailed records, such as before-and-after photos of your project. Make sure to use the correct tax forms for federal energy credits and state historic credits [2][5]. For projects involving historic properties, compliance with the Secretary of the Interior's Standards for Rehabilitation is non-negotiable - any deviation could disqualify you from receiving credits. For financial documentation, projects with qualified rehabilitation expenses under $500,000 require a Certified Public Accountant (CPA) to complete an Agreed-Upon Procedures (AUP) report, while projects with expenses of $500,000 or more require a full independent audit as part of the application process.[2][4].

Looking ahead to 2025, ensure that any products used for federal credits include the required Qualified Manufacturer Identification Number (QMID) [5]. By documenting thoroughly, planning your timeline strategically, and consulting professionals, you can navigate both construction and tax compliance with ease. These steps will help you maximize the financial benefits of your remodel and add lasting value to your investment.

FAQs

What home upgrades are eligible for the Virginia Livable Home Tax Credit?

The Virginia Livable Home Tax Credit offers financial relief for homeowners making accessibility and sensory modification upgrades to their homes. These upgrades can include structural changes or built-in appliances designed to assist individuals with physical or sensory disabilities. Common examples are wheelchair ramps, widened doorways, or specialized alarm systems tailored to unique needs.

This tax credit reimburses up to 50% of eligible modification costs, with a maximum benefit of $6,500 per dwelling. To qualify, the upgrades must improve the home's accessibility or functionality for individuals with disabilities.

What’s the best way to time my remodeling projects to take advantage of tax credits?

To take full advantage of tax credits, aim to finish eligible upgrades by December 31, allowing you to claim them on that year’s tax return. If you’re tackling larger projects, think about spreading them out over several years to stay within annual limits - like the $3,200 cap for the federal Energy Efficient Home Improvement Credit (or $2,000 specifically for heat pumps). This credit applies to qualifying projects completed between January 1, 2023, and December 31, 2032.

In Virginia, you can also benefit from historic rehabilitation tax credits, which can be combined with federal incentives. By carefully planning your project timeline, you can maximize your savings while ensuring you meet the requirements for both state and federal programs.

What documents do I need to claim federal and Virginia state tax credits for home remodeling?

To claim the federal Energy-Efficient Home Improvement Credit, you’ll need to file IRS Form 5695 along with your tax return. Keep all necessary documentation, such as receipts, manufacturer’s certification statements, and proof of installation for qualified upgrades like heat pumps, windows, doors, insulation, or electrical panel improvements. Additionally, you might need a detailed cost breakdown showing the expenses for equipment, labor, and related services. For home-energy audits, ensure you have a qualified audit report ready.

For Virginia-specific tax credits, like the historic rehabilitation credit, there’s a three-step certification process managed by the Department of Historic Resources. This process involves completing application forms, submitting a CPA-prepared report (or an audit for projects costing less than $500,000), and providing invoices, contracts, photographs, and a detailed expense schedule. Each step has specific requirements, so it’s crucial to carefully review the agency’s application checklist to ensure everything is in order.