Both federal HVAC tax credits — Section 25C (Energy Efficient Home Improvement Credit) and Section 25D (Residential Clean Energy Credit) — apply only to equipment placed in service on or before December 31, 2025. Both were terminated by the One Big Beautiful Bill Act (OBBBA, Public Law 119-21, signed July 4, 2025) for any property placed in service after that date. HVAC equipment installed in 2026 — including geothermal heat pumps previously covered by 25D — does not qualify for either federal credit. No grandfather, no transition relief: the trigger is "placed in service," not when you signed a contract or paid a deposit. (Sources: IRS OBBB FAQ; Congress.gov CRS IN12611; IRS 25D page.)
Equipment placed in service on or before Dec 31, 2025 can still be claimed on the 2025 federal tax return (IRS Form 5695) filed in early 2026. For 2026 installs, the active federal pathways are the IRA-funded HOMES and HEAR rebate programs (separately appropriated, survived OBBBA), plus state and utility rebates.
This guide covers what was available through 2025, how to file a 2025 claim, and what state/federal rebate programs remain for 2026 installs.
Sources: IRS Energy Efficient Home Improvement Credit page; IRS OBBBA FAQ (PL 119-21); ENERGY STAR federal tax credits page.
Federal Tax Credits Through Dec 31, 2025 (Now Expired for 2026 Installs)
The Inflation Reduction Act (IRA) tax credits applied to equipment placed in service through December 31, 2025:
- Section 25C (Energy Efficient Home Improvement Credit): Up to $2,000 for heat pumps, $600 for AC systems, $500 for furnaces. Terminated by OBBBA for installs after Dec 31, 2025.
- Section 25D (Residential Clean Energy Credit): historically 30% back on geothermal heat pumps, solar, and batteries with no cap. Expired for property placed in service after Dec 31, 2025 under OBBBA. No federal 25D credit is available for 2026 installs. Unused 25D credit from a pre-2026 qualifying install can still be carried forward to future tax years per existing IRS rules. (Source: IRS 25D page; Congress.gov CRS IN12611.)
These credits were the backbone of federal HVAC incentives since the IRA passed in August 2022. They covered heat pumps, central air conditioners, furnaces, boilers, insulation, windows, and geothermal systems through their effective period.
"Placed in service" is the key date. The IRS defines this as the date your equipment is fully installed and operational — not when you signed a contract, placed an order, or made a payment. Equipment had to be installed and operational by December 31, 2025 to qualify for the 25C credit. Equipment installed in 2026 does not qualify, regardless of when it was purchased.
Timeline of Key Changes
| Event | Date | Impact |
|---|---|---|
| Inflation Reduction Act signed | August 16, 2022 | Created enhanced 25C/25D credits through 2032 |
| Enhanced 25C took effect | January 1, 2023 | 30% credit, $3,200 annual cap |
| PIN requirements began | January 1, 2025 | Manufacturers required to issue PINs |
| OBBBA signed into law | July 4, 2025 | Accelerated termination of 25C, 25D |
| 25C expired | December 31, 2025 | No federal 25C credit for installs in 2026 |
| 25D expired | December 31, 2025 | No federal 25D credit for installs in 2026; carryforward of pre-2026 credit still allowed |
| 45L (builder credit) terminates | June 30, 2026 | Builder/developer credit on new energy-efficient homes ACQUIRED after that date; not a homeowner credit |
| 179D (commercial) terminates | June 30, 2026 (construction begins) | Commercial buildings; not residential |
What Federal Credits Were Available (Now Expired)
Understanding what was available helps you determine if you can still claim credits for 2026 installations on your upcoming tax return.
Section 25C Credit Amounts (Through Dec 31, 2025)
| Equipment | Credit | Max Annual Limit |
|---|---|---|
| Air-source heat pumps | 30% of cost | $2,000 |
| Heat pump water heaters | 30% of cost | $2,000 |
| Central air conditioners | 30% of cost | $600 |
| Gas furnaces (95%+ AFUE) | 30% of cost | $600 |
| Boilers (95%+ AFUE) | 30% of cost | $600 |
| Electrical panel upgrades (with HP) | 30% of cost | $600 |
| Insulation & air sealing | 30% of cost | $1,200 combined |
| Windows & skylights | 30% of cost | $600 |
| Exterior doors | 30% of cost | $250/door, $500 total |
| Home energy audit | 30% of cost | $150 |
| Combined annual maximum | — | $3,200 |
Section 25D Credit Amounts (Historical — Expired for installs after Dec 31, 2025)
| Equipment | Credit | Max Limit |
|---|---|---|
| Solar electric (PV) systems | 30% of cost | No cap |
| Solar water heating | 30% of cost | No cap |
| Geothermal heat pumps | 30% of cost | No cap |
| Battery storage (≥3 kWh) | 30% of cost | No cap |
| Small wind energy | 30% of cost | No cap |
Key difference between 25C and 25D: Section 25C had annual caps ($3,200 max) and was nonrefundable. Section 25D historically had no dollar cap — just 30% of total cost — and allowed unused credits to carry forward. If you have unused 25D credits from a 2025 or earlier installation, you can typically still carry them forward on future tax returns under existing IRS rules (verify with a tax professional and the IRS Section 25D page).
Filing 25C on a 2025 Install (Filed in Early 2026)
If you installed qualifying equipment on or before December 31, 2025, you claim those credits when you file your 2025 taxes (typically by April 15, 2026). Here's exactly how.
Step-by-Step Filing Process
Step 1: Gather your documentation. You'll need itemized invoices showing equipment model numbers, the manufacturer's Product Identification Number (PIN) — a 17-character code required for all 25C claims on equipment installed in 2025 — the manufacturer's Qualified Manufacturer Identification Number (QMID), and proof of installation date.
Step 2: Verify equipment eligibility. Your equipment must have met the Consortium for Energy Efficiency (CEE) highest efficiency tier (not including advanced tiers) in effect at the beginning of the year it was installed. Check the ENERGY STAR Product Finder or CEE's qualified product lists.
Step 3: Complete IRS Form 5695. Part I covers Section 25C credits. Part II covers Section 25D credits. Enter equipment costs, calculate 30% of eligible expenses, and apply the annual caps.
Step 4: Transfer to Form 1040. The credit amount from Form 5695 flows to Schedule 3, Line 5 of your Form 1040, reducing your tax liability dollar-for-dollar.
Real-World Example: Claiming a 2025 Heat Pump Installation
The Nguyen family in Phoenix, AZ installed a Carrier Infinity 26 heat pump (SEER2 24, HSPF2 13) in October 2025 for $12,400 total (equipment + installation). Here's their credit calculation (claimed on the 2025 return filed in early 2026):
| Item | Amount |
|---|---|
| Total installed cost | $12,400 |
| 30% credit | $3,720 |
| 25C annual cap for heat pumps | $2,000 |
| Credit claimed | $2,000 |
They also replaced their insulation ($2,800 installed) and upgraded their electrical panel ($1,900 installed) in the same year:
| Item | Cost | 30% Credit | Cap | Claimed |
|---|---|---|---|---|
| Heat pump | $12,400 | $3,720 | $2,000 | $2,000 |
| Insulation | $2,800 | $840 | $1,200 | $840 |
| Panel upgrade | $1,900 | $570 | $600 | $570 |
| Total | $17,100 | — | — | $3,410 |
Wait — that exceeds $3,200. The heat pump credit has its own $2,000 bucket, and the remaining improvements share a $1,200 bucket. So the Nguyens' combined cap is $3,200, meaning the panel upgrade credit gets trimmed to $360:
| Category | Cap | Claimed |
|---|---|---|
| Heat pump (25C HP bucket) | $2,000 | $2,000 |
| All other improvements (25C general bucket) | $1,200 | $1,200 |
| Total federal credit | $3,200 | $3,200 |
Don't forget: 25C is nonrefundable. If the Nguyens only owe $2,500 in federal income tax, they'll receive a $2,500 credit — not $3,200. The remaining $700 cannot be carried forward or refunded. Unlike 25D, unused 25C credits are lost.
Documentation Checklist for 2025 Claims
Keep all of the following for at least 3 years (the IRS recommends keeping basis-related records indefinitely):
- Itemized contractor invoice with model numbers and installation dates
- Manufacturer's PIN (17-character code) — required for 2025 25C claims
- Manufacturer's QMID code
- AHRI certificate or ENERGY STAR certification
- Manufacturer's written certification that the product qualifies
- Photos of installed equipment (recommended, not required)
- Proof of payment (cancelled checks, credit card statements)
- Completed IRS Form 5695
What's Still Available in 2026: State & Utility Programs
With federal credits gone, the savings landscape has shifted to state-administered programs, utility rebates, and the remaining IRA-funded rebate initiatives. Here's the current picture.
IRA-Funded State Rebate Programs
The Inflation Reduction Act allocated approximately $8.8 billion for two major rebate programs administered by individual states. Unlike tax credits, these are point-of-sale rebates — meaning you get the discount upfront rather than waiting until tax filing.
HOMES (Home Energy Performance-Based, Whole-House Rebates)
The HOMES program rewards whole-home energy efficiency retrofits. Rebate amounts are based on how much energy your upgrades save.
| Energy Savings | Standard Household | Low/Moderate Income (≤80% AMI) |
|---|---|---|
| 20–34% reduction | Up to $2,000 | Up to $4,000 |
| 35%+ reduction | Up to $4,000 | Up to $8,000 |
| Multifamily (per unit) | Up to $2,000 | Up to $4,000 |
| Max per household | $4,000 | $8,000 |
HOMES requires a professional home energy assessment (either modeled or measured savings methodology) and verified energy savings. You can't just swap a furnace — the program incentivizes comprehensive retrofits that address insulation, air sealing, HVAC, and other systems together.
HEAR (Home Electrification and Appliance Rebates)
HEAR targets individual appliance upgrades with a focus on electrification. It's only available to households earning less than 150% of area median income (AMI).
| Equipment | Max Rebate (≤80% AMI) | Max Rebate (80–150% AMI) |
|---|---|---|
| Heat pump HVAC | $8,000 | $4,000 |
| Heat pump water heater | $1,750 | $1,750 |
| Electric stove/cooktop | $840 | $840 |
| Insulation & air sealing | $1,600 | $1,600 |
| Electrical panel upgrade | $4,000 | $2,000 |
| Electric wiring | $2,500 | $1,250 |
| Max per household | $14,000 | $7,000 |
HOMES and HEAR cannot be combined on the same project, but a household can use both programs for different projects. For example, you could use HEAR for a heat pump installation and HOMES for a separate whole-home weatherization project.
State Program Rollout Status (as of Early 2026)
Program availability varies significantly by state. Some states launched in 2024–2026, while others are still in development.
| Status | States (Examples) |
|---|---|
| HEAR active and accepting applications | California, Colorado, New York, Washington, Maine, North Carolina, Rhode Island, Vermont |
| HEAR launching Q1–Q2 2026 | South Carolina, Texas, Pennsylvania, Ohio, Georgia, Florida |
| HOMES active | New York, Maine, Rhode Island |
| HOMES launching 2026 | Colorado, California, Texas, North Carolina |
| Still in program design | Several states — check your state energy office |
Funding is first-come, first-served. California's HEEHRA program for Central and Southern California was fully reserved by January 2026. Once state allocations are exhausted, no additional federal funding is expected. Apply early.
Utility Company Rebates
Nearly every major utility company offers its own efficiency rebates, independent of federal or state programs. These typically range from $200 to $2,000+ and vary by utility, equipment type, and efficiency level.
| Utility Type | Typical Rebate Range | Common Requirements |
|---|---|---|
| Electric cooperatives | $200–$1,500 | ENERGY STAR certified |
| Investor-owned utilities | $300–$2,500 | Specific SEER2/HSPF2 minimums |
| Municipal utilities | $200–$1,000 | Varies widely |
| Gas utilities | $200–$800 | 95%+ AFUE for furnaces |
Real-World Example: Maximizing 2026 Savings Without Federal Credits
Carlos and Maria in Denver, CO need a new heat pump system. Total installed cost: $14,000. Here's how they stack incentives in 2026:
| Incentive | Source | Amount |
|---|---|---|
| HEAR rebate (household ≤80% AMI) | Colorado Energy Office | $8,000 |
| Xcel Energy Clean Heat rebate | Utility | $1,500 |
| Denver metro DRCOG grant | Regional | $1,200 |
| Total incentives | $10,700 | |
| Out-of-pocket cost | $3,300 |
That's 76% of the project cost covered — better than any federal tax credit ever offered. The catch? They had to qualify as low-income (≤80% AMI) and use a state-registered HEAR contractor.
Real-World Example: Middle-Income Homeowner in 2026
Jennifer in Raleigh, NC earns $85,000/year (about 120% of her county's AMI). She qualifies for HEAR at the moderate-income tier and is installing a heat pump. Here's her calculation:
| Incentive | Source | Amount |
|---|---|---|
| HEAR rebate (80–150% AMI) | North Carolina Energy Saver NC | $4,000 |
| Duke Energy rebate | Utility | $750 |
| Total incentives | $4,750 | |
| Heat pump installed cost | $11,500 | |
| Out-of-pocket cost | $6,750 |
Real-World Example: Higher-Income Homeowner — Limited Options
Dave and Lisa in suburban Dallas, TX earn $180,000/year, well above 150% AMI. Texas hasn't launched its HOMES or HEAR programs yet as of early 2026. Their savings picture is thin:
| Incentive | Source | Amount |
|---|---|---|
| Oncor utility rebate | Utility | $400 |
| Manufacturer rebate | Trane seasonal promo | $1,200 |
| Total incentives | $1,600 | |
| Mini-split heat pump installed cost | $9,800 | |
| Out-of-pocket cost | $8,200 |
For higher-income homeowners in states without active IRA rebate programs, utility rebates and manufacturer promotions are the primary savings tools in 2026.
The Post-Federal-Credit Landscape: What to Expect
The elimination of 25C and 25D doesn't mean energy efficiency is dead — it means the incentive structure has fundamentally changed.
Key Shifts in 2026
From tax credits to rebates. Tax credits required waiting until you filed your return the following year. State rebate programs like HEAR offer point-of-sale discounts — you pay less at checkout.
From universal to income-targeted. The 25C credit had no income limit. HEAR is restricted to households earning ≤150% AMI, and the best rebates go to those earning ≤80% AMI. HOMES is available to all income levels, but low-income households get doubled caps.
From national to patchwork. One federal form (5695) covered the entire country. Now you're dealing with your specific state's program rules, your specific utility's rebate requirements, and your specific county's AMI thresholds.
From equipment-based to performance-based. The 25C credit cared about what you installed. HOMES cares about how much energy you save. This favors comprehensive retrofits over one-for-one equipment swaps.
Will Federal HVAC Credits Return?
As of mid-2026, there is no pending legislation to reinstate Sections 25C or 25D. The OBBBA represented a deliberate policy decision to phase out these IRA provisions. However, energy policy is always subject to political change. Future legislation could create new incentive programs, though homeowners shouldn't delay needed HVAC replacements waiting for hypothetical credits.
How to Find Every Available Incentive in 2026
Follow this step-by-step process to maximize your savings:
Step 1: Check your state energy office website. Search "[your state] energy office HVAC rebates 2026" or visit the DOE's list of state energy offices. Determine if HOMES and HEAR are active in your state.
Step 2: Verify your income eligibility. HEAR requires household income ≤150% AMI. Look up your county's AMI using HUD's income limits dataset. A family of 4 in Denver County, CO has an AMI of about $110,400 — so 150% AMI is approximately $165,600.
Step 3: Contact your electric and gas utility. Ask specifically about heat pump rebates, high-efficiency AC rebates, and weatherization programs. Some utilities offer enhanced rebates for ENERGY STAR Most Efficient products.
Step 4: Check the DSIRE database. The Database of State Incentives for Renewables & Efficiency (dsireusa.org) catalogs every state and utility incentive program in the country.
Step 5: Ask your HVAC contractor. Good contractors stay current on every available incentive. Ask them to provide a written breakdown of all rebates applicable to your project before signing a contract.
Step 6: Stack incentives. In most cases, you can combine state rebates, utility rebates, and manufacturer promotions. The key rule: total incentives cannot exceed total project cost, and HOMES + HEAR cannot both apply to the same project.
Key Takeaways:
- The federal Section 25C HVAC tax credit expired December 31, 2025 under the OBBBA (signed July 4, 2025). Equipment installed in 2026 does not qualify.
- Section 25D (geothermal/solar) expired for property placed in service after Dec 31, 2025 (OBBBA). Carryforward of unused pre-2026 credit still allowed. (Source: IRS 25D page; Congress.gov CRS IN12611.)
- If you installed qualifying equipment on or before Dec 31, 2025, claim it on IRS Form 5695 with your 2025 return (file by April 15, 2026).
- For 2026 installs, HOMES and HEAR state rebate programs are the primary federal-to-state incentive pathways — offering up to $8,000–$14,000 for qualifying households.
- Utility rebates remain available regardless of income and typically range from $200–$2,500.
- Low-income households (≤80% AMI) get the most generous rebates. Higher-income homeowners have fewer options.
- Incentive stacking is possible but programs have anti-double-dipping rules.
- Apply early — many state programs are first-come, first-served with finite budgets.