Key Update: The federal Section 25C Energy Efficient Home Improvement Credit, which included up to $2,000 for heat pumps and $600 for central ACs, expired on December 31, 2025. Installations completed in 2026 are not eligible for this federal credit.
What Happened to the Federal Tax Credit?
The Inflation Reduction Act (IRA) created the Section 25C Energy Efficient Home Improvement Credit, which offered homeowners 30% of total installation costs (including labor) for qualifying HVAC equipment. The maximum credit was $2,000 per year for heat pumps and heat pump water heaters, and $600 per year for central air conditioners.
This credit was available for equipment installed through December 31, 2025. If you had a qualifying system installed by that deadline, you can still claim the credit when filing your 2025 taxes during the 2026 tax season.
Can I Still Claim the 2025 Credit?
Yes — if your heat pump or qualifying AC was installed and placed in service on or before December 31, 2025, you can claim the credit on your 2025 tax return. Here's what qualified:
| Equipment | Max Credit | Requirements |
|---|---|---|
| Heat Pump (ducted or ductless) | $2,000 | CEE highest efficiency tier |
| Heat Pump Water Heater | $2,000 | ENERGY STAR certified |
| Central Air Conditioner | $600 | ENERGY STAR Most Efficient |
What's Available in 2026?
While the federal 25C credit has expired, there are still ways to save:
State and Local Rebates
Many states, utilities, and local governments offer their own rebates for energy-efficient HVAC equipment. These vary widely by location but can range from $250 to $3,000+. Check with your local utility company and state energy office for current programs.
Manufacturer Rebates
Major brands like Carrier, Trane, and Lennox regularly offer seasonal rebates ranging from $100 to $1,500 on qualifying systems. These are typically available in spring and fall when demand for installations is lower.
R-454B Refrigerant Transition Incentives
Starting in 2026, all new AC installations must use low-GWP refrigerants like R-32 or R-454B instead of R-410A. Some manufacturers and utilities are offering transition incentives to encourage early adoption of the new refrigerant systems.
How to Maximize Your Savings in 2026
Even without the federal tax credit, you can still make smart financial decisions on your HVAC purchase:
- Get multiple quotes — Pricing varies significantly between installers. We recommend at least 3 quotes.
- Consider total cost of ownership — A higher-efficiency unit costs more upfront but saves money every month on energy bills.
- Check for utility rebates — Your electric company may offer rebates you don't know about.
- Time your purchase — Spring and fall are off-peak seasons when installers may offer better pricing.
- Ask about financing — Many HVAC companies offer 0% financing for 12-60 months.