2025 HVAC Tax Incentive Changes: What You Need to Know

Upgrading your heating, ventilation, and air conditioning (HVAC) system is an investment that pays off in comfort, energy savings—and right now, major federal tax incentives. But you need to act quickly.

The 2025 federal budget, finalized in July, updated that the current tax credits under sections 25C and 25D of the Inflation Reduction Act (IRA) will expire on December 31, 2025.

If you’ve been thinking about replacing your HVAC system, 2025 is your last chance to claim these significant tax savings.

At Maki Heating & Air Conditioning, we make the process easy. From helping you select the right energy-efficient equipment to guiding you through local, state, and federal incentives, we’re your partner in maximizing savings and upgrading your comfort.

Why 2025 Is a Critical Year for Tax Credits

The IRA continues to offer generous federal tax credits for homeowners who make qualifying energy-efficiency improvements—but only until the end of 2025. After this year, those credits will be phased out and unavailable for future installations.

Here’s what you can currently deduct on your federal tax return under Section 25C (non-renewable home upgrades) and Section 25D (renewable systems):

• Air conditioners and furnaces: Up to $600
• Air-source heat pumps and heat pump water heaters: Up to $2,000
• Energy audits: Up to $150
• Electrical panel upgrades: Up to $600
• Insulation and air sealing: Up to $1,200
• Windows and skylights: Up to $600
• Solar, battery storage, geothermal systems: 30% of total cost with no cap (25D)

These credits apply to both equipment and installation costs when ENERGY STAR^® certification and eligibility criteria are met.

To claim these credits, you’ll need to file IRS Form 5695 with your 2025 return. Verify with a tax expert that your installation qualifies. Remember, these are tax credits, which reduce your tax liability (the amount you owe in taxes); you will not receive a tax refund for qualifying energy upgrades.

What About HVAC Rebates?

In addition to tax credits, the IRA also established state-administered rebate programs. However, these programs came with limited funding, which lasts until funds are depleted or expire September 30, 2031, whichever happens first. With more states launching programs in 2025, demand is expected to surge, so be sure to start planning for your HVAC upgrades while funding is available.

Check your state’s status on the National Association of State Energy Officials (NASEO) website or by using the Database of State Incentives for Renewables & Efficiency (DSIRE).

With this funding, states are implementing two primary programs: HOMES and HEAR, though a third option is open to states: HER. Below are the general guidelines for each rebate program, though states may enforce more stringent income or rebate caps.

Home Efficiency Rebates (HOMES Program)

The HOMES program provides rebates for whole-home energy improvements based on the energy savings achieved through retrofits. These performance-based incentives are available to many homeowners with low- or moderate-income; those making less than 80% or up to 150% of their local area median income (AMI), respectively.

Home Electrification and Appliance Rebates (HEAR Program)

Targets low- and moderate-income households and provides point-of-sale rebates on eligible electric appliances, like:

Heat pumps: Up to $8,000

Electric panel upgrades: Up to $4,000

Wiring upgrades: Up to $2,500

Insulation and air sealing: Up to $1,600

Electric appliances (e.g., stove, dryer): Up to $840 each

You may qualify for up to 100% of your project costs to be covered if your household income is below 80% of your AMI. Those making over 80% AMI can earn up to 50% in rebates on their total project costs.

Home Energy Rebates (HER Program)

The HER program rewards homeowners for making broad energy-saving upgrades that reduce a home’s energy use by at least 20%. These improvements could include HVAC upgrades, insulation, energy-efficient windows, or panel and wiring updates. To qualify, all installed products must meet energy efficiency standards, such as ENERGY STAR^® certification.

Unlike some programs, HER is available to all homeowners—there are no income limits—but lower-income households are eligible for larger rebates, up to a maximum of $8,000.

Other State and Local Incentives

Local utility companies and HVAC manufacturers may also offer additional savings, especially during the peak summer season. Outside of IRA-funded programs, states may implement their own energy-saving incentives.

Our team at Maki Heating & Air Conditioning stays current on all local and regional incentives and will help you apply for every available program to maximize your return.

Time Is Running Out—Don’t Miss Out

This is the final year for homeowners to take advantage of the federal energy-efficiency tax credits. To qualify, projects must be completed and placed in service by December 31, 2025.

And since rebates are distributed on a first-come, first-served basis, delaying your installation could mean missing out if your state’s program runs out of funds.

Let Maki Heating & Air Conditioning Help You Save in 2025

Maki Heating & Air Conditioning can guide you through the maze of 2025 HVAC tax credits and rebates. We’ll help you choose the right energy-efficient system for your Foresthill, CA home and ensure your upgrade is eligible for the maximum possible savings.

Call us today at 530-885-3449 or book your appointment online to schedule your free consultation—and lock in your rebates and tax credits before they’re gone for good.

Due to government regulation, this information can change after the blog is published. Speak to a professional to verify available rebates and tax credits.