Incentives
The federal HVAC tax credit, explained properly
Explaining it properly now means explaining the repeal, and the three things about it that still decide real money.
Written by HYRE HVAC Research Desk Primary-source research, data analysis and fact checking
The direct answer
For a residential HVAC installation completed in 2026, the federal tax credit is $0. Under Public Law 119-21, § 25C ends for property placed in service after December 31, 2025, and § 25D for expenditures made after that date.
A system completed by then may still be claimable on a 2025 return, but only with a Qualified Manufacturer Identification Number.
What do § 25C and § 25D say now, and what still decides money?
26 U.S.C. § 25C(i), the termination subsection, reads in full: “This section shall not apply with respect to any property placed in service after December 31, 2025.”
26 U.S.C. § 25D(h) reads: “The credit allowed under this section shall not apply with respect to any expenditures made after December 31, 2025.” Both were amended by Public Law 119-21 (139 Stat. 72), enacted July 4, 2025 — § 70505(a) and § 70506(a) respectively.
We read both sections and their amendment notes on September 5, 2026.
Three things follow that still decide money. One: the test is when the system was placed in service, which 26 U.S.C. § 25D(e)(8) resolves to the completion of the original installation — not when you ordered, paid or took delivery.
Two: a system completed on or before December 31, 2025 may still be claimable on a 2025 return filed during 2026, but only with a Qualified Manufacturer Identification Number on the return.
Three: the two sections behaved differently when your tax bill was small — 26 U.S.C. § 25C was nonrefundable with no carryforward, so unused credit was simply lost, while unused 26 U.S.C. § 25D credit carried to the following year. That asymmetry still matters to anyone with a 2025 geothermal installation.
Two sections, two different equipment sets, two different tests
Almost all published writing on “the HVAC tax credit” treats these as one thing. They were never one thing, and the differences between them are where the remaining decisions sit.
26 U.S.C. § 25C — Energy Efficient Home Improvement Credit
What it covered: air-source heat pumps, central air conditioners, furnaces and boilers, heat pump water heaters, insulation and air sealing, exterior windows and doors, certain panel upgrades, and a home energy audit.
The test: placed in service. The statute says the section “shall not apply with respect to any property placed in service after December 31, 2025”.
Structure: 30% of cost, subject to an overall annual cap of $1,200 with a separate $2,000 allowance for heat pumps, heat pump water heaters and biomass equipment on top.
Nonrefundable, and with no carryforward — credit beyond the tax you owed was lost outright, which is the part that caught people out even while the credit existed.
Previously due to end: December 31, 2032. Public Law 119-21 § 70505(a) moved it forward by seven years.
26 U.S.C. § 25D — Residential Clean Energy Credit
What it covered, for HVAC purposes: ground-source (geothermal) heat pumps, at 30% of qualified expenditure with no dollar cap.
The test: expenditures made. The amendment note is explicit: “Pub. L. 119–21, § 70506(a), substituted “with respect to any expenditures made after December 31, 2025” for “to property placed in service after December 31, 2034”.”
Structure: 30% of qualified expenditure with no dollar cap. Nonrefundable, but unused credit carried forward to the succeeding taxable year.
Previously due to end: December 31, 2034. Public Law 119-21 § 70506(a) moved it forward by nine years. HyreHVAC analysis: because this section was uncapped and geothermal projects are large, this is the bigger of the two losses by a wide margin, and it is the one least often reported.
What “placed in service” actually means, and the trap it creates
The placed-in-service paragraph decides whether a project straddling the new year is worth thousands of dollars or nothing, and it is the one no competing page quotes.
Source fact: 26 U.S.C. § 25C carries no definition of its own; it borrows one. 26 U.S.C. § 25C(f) provides: “Rules similar to the rules under paragraphs (4), (5), (6), (7), and (8) of section 25D(e) shall apply.”
Paragraph (8) of 26 U.S.C. § 25D(e) is the timing rule, and it reads, verbatim: “Except as provided in subparagraph (B), an expenditure with respect to an item shall be treated as made when the original installation of the item is completed.”
Subparagraph (B) adds the new-construction case: “In the case of an expenditure in connection with the construction or reconstruction of a structure, such expenditure shall be treated as made when the original use of the constructed or reconstructed structure by the taxpayer begins.”
Source fact: The IRS has confirmed this rule for 26 U.S.C. § 25D.
IRS Fact Sheet FS-2025-05, Q7: “Section 25D(e)(8)(A) provides that an expenditure with respect to an item is treated as made when the original installation of the item is completed.”
The accompanying guidance states that a credit cannot be claimed for property installed after December 31, 2025 even if the taxpayer paid for that property on or before that date.
HYRE HVAC Research Desk analysis — our reading, not an IRS position. Because § 25C(f) imports rules similar to § 25D(e)(8), the desk reads the same installation-completion test as governing § 25C — so a system paid for in December 2025 but installed in January 2026 falls outside the credit.
In plain terms: a system contracted in November 2025, paid in full in December 2025, delivered to the driveway on 30 December and commissioned on January 6, 2026 is on the wrong side of the line, under both the plain wording of 26 U.S.C. § 25C(i) and the installation-completion rule 26 U.S.C. § 25C(f) imports.
The absence is itself a finding: This is the HYRE HVAC Research Desk’s reading of the statutory cross-reference.
The IRS has published no § 25C-specific guidance on the 2025-purchase / 2026-installation case: FS-2025-05 contains exactly one § 25C question, and it concerns manufacturer reporting.
We looked for that guidance specifically, and reading the full fact sheet on September 5, 2026 it is not there.
If your project straddles the boundary, this is a question for a tax professional and not for a website — including this one.
A practical consequence worth naming: a delay of a few days in commissioning, for a part on backorder or a permit inspection that slipped, was capable of moving a project across this line. That is not a hypothetical risk in HVAC scheduling.
The caps as they stood through 2025
Historical, and relevant only to a system whose installation completed on or before December 31, 2025 and is being claimed on a return filed during 2026. These are not available for a 2026 installation.
| Item | Cap | Statutory basis |
|---|---|---|
| Overall annual cap | $1,200 | 26 U.S.C. § 25C(b)(1) |
| Heat pumps, heat pump water heaters, biomass stoves and boilers | $2,000, in addition to the $1,200 | 26 U.S.C. § 25C(b)(5) |
| Exterior doors | 30% of cost, $250 per door, $500 total | 26 U.S.C. § 25C |
| Exterior windows and skylights | 30% of cost, up to $600 | 26 U.S.C. § 25C |
| Insulation and air sealing | 30% of cost, within the $1,200 | 26 U.S.C. § 25C |
| Home energy audit | $150 | 26 U.S.C. § 25C |
| 26 U.S.C. § 25D — geothermal heat pumps | 30% of qualified expenditure, no cap | 26 U.S.C. § 25D(a) |
Read from the statute and the IRS’s own credit page on September 5, 2026.
The asymmetry that mattered most: 26 U.S.C. § 25C was nonrefundable and had no carryforward. If your total tax liability for the year was $700 and your qualifying credit was $1,200, you received $700 and the remaining $500 was gone.
26 U.S.C. § 25D was also nonrefundable, but the unused portion carried to the following year. Anyone filing a 2025 return with a geothermal installation and insufficient 2025 liability should be aware of that difference.
If your installation completed in 2025: what the claim requires
The IRS’s own words on the final year, quoted rather than summarized. This is mechanics, not advice — the return is between you and a tax professional.
Not ordered, not paid, not delivered. The IRS page states: “You can claim the credit for improvements made through December 31, 2025.” The completion date is the one on the commissioning or final invoice, and it is the date the whole claim rests on.
Quoted from the IRS: “In 2025, for each item of qualifying property placed in service, no credit will be allowed unless the item was produced by a qualified manufacturer and the taxpayer reports the Qualified Manufacturer Identification Number (QMID) for the item on their tax return.”
The requirement derives from Revenue Procedure 2024-31. It applies to specified property placed in service after December 31, 2024, so it covers the whole of the final year.
The number comes from the manufacturer, usually via your installer — and it is far easier to obtain while the installer still has an open relationship with you than a year later.
The IRS has withdrawn that obligation. FS-2025-05, Q6: “No. Because of the accelerated termination of the section 25C credit, periodic written reports, including reporting for property placed in service before January 1, 2026, are no longer required.”
“A manufacturer is still required to register with the IRS to become a qualified manufacturer for its specified property to be eligible for the credit.”
HyreHVAC analysis: the taxpayer-side QMID requirement was not withdrawn — only the manufacturer’s periodic reporting was. The number still has to be on your return; there is simply no longer a reporting stream behind it, which makes getting it from the installer more urgent, not less.
Quoted from the IRS: “No. Financing costs such as interest, as well as other miscellaneous costs such as origination fees and the cost of an extended warranty, are not eligible expenditures for purposes of the credit.” Interest, origination fees and extended warranties were never qualifying expenditure.
Separately, 26 U.S.C. § 25C(f) excluded expenditures made from subsidized energy financing — a below-market loan from a state or utility program is not the same thing as a rebate, and it could disqualify the financed portion outright.
A rebate is treated as a reduction in the purchase price, so it reduces the expenditure the credit is computed on.
The IRS has said so specifically for the DOE Home Energy Rebates and worked an example.
The arithmetic, and the three different treatments for a utility subsidy, a rebate and a state incentive, are on the stacking page.
The IRS directs claimants to Form 5695, Residential Energy Credits: “Use IRS Form 5695, Residential Energy Credits and file it with your federal income tax return for the year the credit is claimed.”
This is not tax advice and we are not tax advisers: Take the completion date, the invoice, the model numbers and the QMID to a tax professional and let them file it.
None of the above applies to a system placed in service in 2026. For those, the federal figure is $0 and the remaining money is at your utility and your state energy office — see the incentives hub.
The ten-second freshness test for any HVAC page or proposal
HyreHVAC analysis: The repeal has an unusually clean signature. Any 2026 HVAC proposal, calculator or article that shows a federal credit line — “$2,000 federal tax credit”, “30% federal credit”, “federal incentive” — is quoting repealed law.
On a heat pump proposal that is a $2,000 error in the direction that flatters the purchase. On a geothermal proposal, at 30% of project cost with no cap, it is routinely five figures.
Use it on content, not just on quotes: If a page telling you about HVAC incentives still shows a live 26 U.S.C. § 25C credit, that single line tells you when its facts were last checked, and you can discount everything else on it accordingly.
It is the most reliable freshness test available in this subject.
The useful next step: Ask each contractor to reissue the proposal with the federal line removed, then compare the bids again. Do that before discussing rebates, because a utility rebate applied on top of a phantom credit is being stacked on a number that was never real.
What is left, and why the repeal did not touch it
Source fact: Public Law 119-21 is a tax act: it amends the Internal Revenue Code. The DOE Home Energy Rebates are appropriations made by the Inflation Reduction Act at IRA §§ 50121 and 50122, administered by state and territory energy offices.
They are not in the Internal Revenue Code, and the Act did not touch them. Utility rebates were never federal tax law at all.
That distinction is the whole reason the answer to “what can I claim” is not simply “nothing” — and it is also why nothing on this page transfers to those programs.
A DOE-funded state rebate is not a credit: it is not claimed on a return, it is not limited by your tax liability, and it usually has to be applied for before the equipment is installed rather than after.
The map of what survives is on the incentives hub, and the paperwork those programs demand is on the application guide.
Questions
Is the §25C tax credit available in 2026?
What was the §25C limit for a heat pump?
Was the credit refundable?
Does the IRS website still show the credit as available?
What is a QMID and do I still need one?
Did the geothermal credit end too?
Are there any federal credits left that a homeowner can use on HVAC?
Written and audited by
HYRE HVAC Research Desk
Primary-source research, data analysis and fact checking
We are a research desk, not a sales floor. We read the federal microdata file, the statute or the manufacturer data sheet ourselves, and we publish the figure with the document it came from and the date we retrieved it.
Where a number cannot be traced to a primary source, we publish the shorter page and say what we could not verify.
The counts below are generated from the published pages themselves, last counted September 28, 2026, and they are what we have actually published rather than what we intend to.
- 13
- studies published
- 12
- federal sources read and cited
- 8
- studies published with their full dataset as CSV
- 51
- jurisdictions reproduced against EIA’s own tables
How this desk works
- Primary sources only. Federal data comes from the agency that collects it, in the file that agency publishes. We do not cite an article that cites a source; we download the source and compute the figure ourselves.
- We validate against the agency before we publish. First, we use each federal microdata file to reproduce the agency’s own published tables. Our cooling research reproduces EIA’s state estimates and standard errors for all 51 jurisdictions. That check caught a variance formula that was off by a factor of four.
- Every estimate carries its uncertainty. These are survey figures, not counts. Standard errors are computed from the replicate weights the federal file supplies and printed beside the estimate. An estimate too imprecise to publish is reported as such rather than printed.
- Nothing is typed by hand. Prose, tables and charts all read from one dataset built by script, so a number in a sentence and the same number in the table below it cannot disagree.
- We publish the data, not just the conclusion. 8 of our 13 studies offer the full computed table as a CSV download on the page, so you can check the analysis or disagree with it. A study without a row-level dataset gets no download link and claims none in its structured data.
- We correct in public. Where we have published a figure wrongly we fix the figure, rewrite any analysis that rested on it rather than patching the number underneath it, and leave a dated correction note on the page.
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Data as of 26 U.S.C. §§ 25C and 25D and IRS guidance as retrieved September 5, 2026. Authorship on this site is organizational: the analysis belongs to the desk rather than to a named individual, and we do not publish credentials we do not hold.
Our editorial policy sets out how we source, date and correct what we publish.
Sources & retrieval dates
The credit is gone. The equipment decision is not
With no federal layer, the system has to justify itself on running cost and remaining service life. Both are computed here from federal data, with every assumption on the page.
This is not tax advice: HyreHVAC does not install, service or sell HVAC equipment, is not a tax adviser, and receives no fee from any incentive program. What is published here is the statutory text with the date we read it.
Tax law changes, and it changed here recently — confirm the current position at irs.gov and with a tax professional before you put any credit or rebate into a purchase decision, in either direction.