Summary: Summary: The federal Section 25C Energy Efficient Home Improvement Credit ended for HVAC equipment placed in service after December 31, 2025, terminated by the One Big Beautiful Bill Act. For 2026 installations there is no federal tax credit for HVAC. What remains: state rebate programs, utility rebates of $300 to $8,000 for qualifying heat pumps, manufacturer promotions, and on-bill utility financing. Systems installed by December 31, 2025 can still claim 25C on 2025 tax returns via IRS Form 5695.
The Section 25C credit, expanded by the Inflation Reduction Act, offered 30 percent of the cost of qualifying energy-efficient home improvements: up to $2,000 per year for heat pumps, up to $600 per year for central AC and furnaces (within a $1,200 annual umbrella shared with windows, doors, and insulation), for a combined cap of $3,200 per year. It was available for tax years 2023 through 2025.
The One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) terminated Section 25C for property placed in service after December 31, 2025. The IRA had originally extended the credit through 2032; the OBBB overrode that. As of 2026, no federal legislation has reinstated or replaced it for residential HVAC. If your system was placed in service on or before December 31, 2025, you can still claim the credit on your 2025 return using IRS Form 5695: keep your manufacturer certification statement, dated invoice, and efficiency documentation.
With 25C gone, state programs are the richest remaining incentives, and they vary enormously. Massachusetts offers up to $8,500 for qualifying whole-home heat pump installations in 2026. Rhode Island Energy's EnergyWise program pays up to $1,250 per ton on cold-climate heat pumps (max $10,000). New York, California, Maine, and several other states run their own heat pump rebate programs, many funded through Inflation Reduction Act programs that were appropriations, not tax credits, and therefore survived the OBBB.
The catch is paperwork: most programs require pre-approval before installation, specific cold-climate efficiency ratings, and approved contractors. Start at your state energy office website, not the contractor's brochure: program rules change yearly and funding can run out. A $5,000 rebate you qualify for beats a $2,000 tax credit you do not.
Electric utilities are the steadiest source of HVAC incentives in 2026: rebates of $300 to $1,000 for high-efficiency central AC and $500 to $8,000 for qualifying heat pumps are common, usually tiered by SEER2 and HSPF2 ratings. Some utilities pay the rebate to your contractor directly, which lowers your invoice; others send you a check after installation and inspection.
On-bill financing is the quiet opportunity: several utilities finance heat pumps at low or zero interest, repaid through your electric bill, with the energy savings offsetting much of the payment. Ask your utility's efficiency program about both rebates and financing before you sign a contractor's financing offer: the utility terms are often better and the contractor may not mention them.
Manufacturers run seasonal promotions, typically spring and fall: $500 to $1,500 off premium systems, extended parts warranties, or free thermostat upgrades. These stack with state and utility rebates. Contractor financing at 0 percent for 12 to 60 months is widely available through manufacturer programs; read the deferred-interest fine print, because some plans charge retroactive interest if the balance is not cleared in the promo period.
Time your purchase if you can: the fall shoulder season (September through November) combines manufacturer promos with contractor availability, and you beat the winter emergency-replacement rush when prices and desperation both peak. An October heat pump quote is routinely 10 percent cheaper than the same quote in January after a cold snap kills the old furnace.
The 25C termination created a wave of outdated marketing: brochures, websites, and sales scripts still advertising federal tax credits that no longer exist for 2026 installations. If a salesperson mentions a federal HVAC tax credit, ask them to name the credit and show current IRS guidance. Section 25C ended for property placed in service after December 31, 2025: that is the current law.
Verify every incentive independently: state energy office, utility rebate page, and a tax professional for anything touching your return. Get rebate eligibility in writing before installation, since most programs deny retroactive applications. The incentives that remain in 2026 are real and valuable, but they reward the homeowner who does the paperwork, not the one who trusts the pitch.
Data current as of October 2026. Sources: contractor pricing data and manufacturer guidance. Estimates only, not a quote. Always get multiple written quotes from licensed local HVAC contractors.