Mechanical Insulation Installation Incentive Act of 2025

This bill creates a tax credit for the labor costs of installing mechanical insulation property. It adds a new section to the Internal Revenue Code and makes related changes.

Sec. 2, Labor costs of installing mechanical insulation property: This section establishes a new tax credit equal to 10 percent of the labor costs paid or incurred by a taxpayer for installing mechanical insulation property. The property must be installed on a mechanical system originally placed in service at least one year earlier, located in the U.S., and subject to depreciation. The installation must meet minimum energy efficiency standards (Reference Standard 90.1) and reduce energy loss. The credit applies to labor costs paid or incurred after December 31, 2025, and before January 1, 2029. The credit is part of the general business credit. Taxpayers cannot deduct the portion of labor costs equal to the credit amount, and if the credit exceeds deductible costs, the capital account must be reduced by the excess.