HVAC in 2026 — Life After the Tax Credit
What changed when the federal 25C credit (30% up to $2,000 for heat pumps) expired on December 31, 2025 — and how to buy heating and cooling in 2026.
The federal 25C Energy Efficient Home Improvement Credit — 30% of installed cost, up to $2,000 a year for a heat pump — expired for any system placed in service after December 31, 2025, terminated by the One Big Beautiful Bill Act (OBBBA, P.L. 119-21). A 2025 install can still be claimed on a 2025 return; a 2026 purchase gets $0 federal credit. State HEAR rebates (up to $8,000, income-qualified), HOMES whole-home rebates, and utility incentives all survive — check DSIRE and your state energy office before you buy.
What changed on January 1, 2026
Section 25C — the Energy Efficient Home Improvement Credit — returned 30% of a qualifying HVAC project's cost, capped at $2,000 a year for a heat pump (shared with heat-pump water heaters and biomass stoves) and a separate $600 cap for a high-efficiency central AC or furnace. The 2022 Inflation Reduction Act reinstated and expanded it effective January 1, 2023, originally written to run through 2032 — but the One Big Beautiful Bill Act (OBBBA, P.L. 119-21), signed July 4, 2025, terminated it for any system placed in service after December 31, 2025, seven years early. The same law ended Section 25D, the 30% residential solar credit, on the same date.
The date that decides is "placed in service" — installed and operational — not when you signed the contract, paid a deposit, or took delivery. A heat pump commissioned by December 31, 2025 qualifies in full and can be claimed on IRS Form 5695 with the 2025 return; one started up on or after January 1, 2026 gets $0 federal credit, even if it was paid for in 2025. The credit is nonrefundable with no carryforward, so it can't exceed what you owe for the tax year you claim it.
What still pays in 2026
The federal credit was one layer of a stack, and the rest of the stack is still standing. IRA-funded rebate programs run by state energy offices survived OBBBA untouched, though rollout still varies state by state — some are fully live, others waitlisted. Utility incentives, state-level tax credits, and low-interest efficiency financing were never part of 25C and were never at risk.
The table below is where to look. HEAR is the closest replacement for what 25C did for heat pumps — a bigger, income-qualified, point-of-sale rebate rather than a tax-time credit — while HOMES pays for whole-home efficiency work based on measured savings rather than a specific product.
Does a heat pump still make sense in 2026?
Less than the expiry headline suggests. The 25C credit put a $2,000 thumb on the heat pump side of the scale, but a ducted heat pump usually wins the install price on its own — about $7,750 to $16,000 on a typical 2,000 sq ft home versus $10,350 to $20,200 for a central AC + gas furnace pair, because you're buying one machine instead of two. Losing the credit is effectively a $2,000 price increase, not a reason to switch systems.
If you qualify for a state HEAR rebate, the math tilts electric again — up to $8,000 at qualifying incomes dwarfs what 25C ever paid. Either way, run your own home's numbers: the HVAC cost calculator prices every system type at 2026 list price, with every incentive left for you to add on top.
| Program | What it pays in 2026 | Where to check |
|---|---|---|
| HEAR (Home Electrification & Appliance Rebates) | Up to $8,000 off a qualifying heat pump, as a point-of-sale discount — income-qualified | Your state energy office |
| HOMES (Home Efficiency Rebates) | Pays for whole-home retrofits based on the energy savings achieved; larger amounts at qualifying incomes | Your state energy office |
| Utility rebates | Per-unit heat-pump, smart-thermostat, and panel incentives, usually with no income test | Your electric utility |
| State credits & rebates | Several states run their own tax credits or rebate programs, unaffected by OBBBA | DSIRE database |
| Financing | 0% or low-APR efficiency loans through utilities, states, and manufacturers | Your installer + utility |
Guides in this topic
Frequently asked questions
- Can I still claim the heat pump tax credit in 2026?
- Only if the system was placed in service — installed and operational — by December 31, 2025. If so, claim 30% of the cost, up to $2,000, on IRS Form 5695 with your 2025 federal return. Anything placed in service in 2026 or later gets no federal credit, and the credit is nonrefundable with no carryforward.
- What does "placed in service" mean for the 25C credit?
- It means installed and operational, not when you signed the contract, paid a deposit, or took delivery. A heat pump commissioned by December 31, 2025 qualifies in full even if the invoice was still unpaid; one started up January 1, 2026 or later earns $0, even against a 2025 contract.
- What HVAC incentives still exist in 2026?
- State HEAR rebates (up to $8,000 off a qualifying heat pump, income-qualified), HOMES whole-home efficiency rebates, utility heat-pump and smart-thermostat incentives, state tax credits tracked by DSIRE, and 0%/low-APR efficiency financing. None of these were touched by OBBBA — only the federal 25C credit expired.
- Is the 25C credit coming back?
- There's no scheduled revival. OBBBA wrote the termination into the statute — the credit doesn't apply to property placed in service after December 31, 2025 — so restoring it would take a new act of Congress. Budget your 2026 purchase around $0 federal and treat any restoration as upside.