If you’ve been Googling “HVAC tax credits 2026” expecting the same 30% federal credit that ran for the past three years, the short answer is: the headline credit is gone. The One Big Beautiful Bill Act (OBBBA, Public Law 119-21), signed July 4, 2025, accelerated the sunset of both Section 25C (Energy Efficient Home Improvement Credit) and Section 25D (Residential Clean Energy Credit) by seven years. Both ended on December 31, 2025.
This guide covers three things:
- If you installed before 12/31/2025 — you can still claim 25C on your 2025 tax return when you file in 2026.
- If you’re shopping in 2026 — federal 25C/25D no longer applies. Here’s what’s still on the table.
- Texas-specific rebates and utility programs still active in 2026.
What changed: OBBBA accelerated the sunset
The Inflation Reduction Act of 2022 originally extended the Section 25C credit through December 31, 2032. The One Big Beautiful Bill Act repealed that and set a hard cutoff:
- Section 25C — No credit allowed for any property placed in service after December 31, 2025 (IRS FAQs on OBBBA modifications).
- Section 25D — No credit for expenditures made after December 31, 2025 (timing is when installation completed, not when you signed the contract).
For HVAC buyers in 2026, this means no federal 30% credit on heat pumps, central AC, gas furnaces, or related insulation upgrades — the four big-ticket items the credit had subsidized.
If you bought in 2025: file your credit on your 2025 return
The credit isn’t retroactively gone. If your heat pump, AC, furnace, or qualifying improvement was placed in service on or before December 31, 2025, you can still claim 25C on the tax return you file in early 2026.
Annual credit limits that applied in 2025 (final year)
The Section 25C credit had a combined annual cap of $3,200, divided into two sub-categories:
Heat Pump and Heat Pump Water Heater Category: Up to $2,000/year
| Equipment | Credit Amount |
|---|---|
| Air-source heat pumps | 30% of cost, up to $2,000 |
| Heat pump water heaters | 30% of cost, up to $2,000 |
| Biomass stoves and boilers | 30% of cost, up to $2,000 |
Other Improvements Category: Up to $1,200/year
| Equipment/Improvement | Credit Amount |
|---|---|
| Central air conditioners | 30% of cost, up to $600 |
| Gas furnaces (97%+ AFUE) | 30% of cost, up to $600 |
| Gas boilers (97%+ AFUE) | 30% of cost, up to $600 |
| Insulation and air sealing | 30% of cost, up to $1,200 |
| Electrical panel upgrades | 30% of cost, up to $600 |
| Windows | 30% of cost, up to $600 |
| Exterior doors | 30% of cost, up to $250 each ($500 max) |
| Home energy audit | 30% of cost, up to $150 |
How to claim on your 2025 return
- File IRS Form 5695 (Residential Energy Credits), Part II, with your 2025 tax return.
- Report the Qualified Manufacturer Identification Number (QMID) for each piece of qualifying equipment. Get this from your manufacturer’s documentation or your installer.
- Keep receipts, manufacturer certification statements, and contractor invoices in your records for at least three years.
- The credit is non-refundable — it reduces your tax liability dollar-for-dollar, but it can’t generate a refund larger than what you owe.
If you owe less than your credit amount, the excess can’t be carried forward. This was true even before OBBBA.
What remains for 2026 buyers
HOMES and HEAR rebate programs (still active)
The OBBBA did not repeal the two state-administered rebate programs the IRA created. These remain on the books:
- HOMES (Home Owner Managing Energy Savings) — rebates based on whole-home energy savings achieved through efficiency improvements (Up to $2,000 standard / $4,000 for low-to-moderate income at 20-35% energy reduction; up to $4,000 / $8,000 at 35%+ reduction).
- HEAR (Home Electrification and Appliance Rebates) — point-of-sale rebates for specific electrification upgrades, limited to households below 150% of Area Median Income. Heat pump rebate up to $8,000.
The catch: these are administered by individual states using federal IRA dollar allocations, and rollout has been uneven. As of early 2026, Texas’s program is being administered by the State Energy Conservation Office (SECO) under the Texas Comptroller. Texas received approximately $690 million in IRA funding for the combined programs.
Verify current status at the Texas SECO website before assuming a rebate is available — funding pools deplete and program windows close as states burn through their allocations.
Section 25D for systems already in progress on 12/31/2025
If you had a solar or geothermal system whose installation completed on or before December 31, 2025, you can still claim 25D (30% with no annual cap) on your 2025 return. If installation completed January 1, 2026 or later — even if you signed the contract in 2025 — no 25D credit is available. The OBBBA specifically uses “expenditure made” timing, which the IRS defines as the date original installation is completed.
Texas utility company rebates (continuing)
These are NOT federal credits and were not affected by OBBBA. Major Texas utilities maintain heat pump and high-efficiency HVAC rebate programs:
- Oncor Electric Delivery — Take A Load Off Texas program offers rebates for high-efficiency AC and heat pump installations. Eligibility is based on customer ZIP code (Central Texas service area applies).
- Austin Energy — Austin-area customers can access Austin Energy’s residential rebates for ENERGY STAR HVAC equipment.
- CPS Energy (San Antonio) — outside our Central Texas service area, but worth knowing about for relatives.
Amounts and eligibility change quarterly. Check directly with your utility before assuming a rebate is available, and ask your installer whether they’re a participating contractor in any of these programs (some utilities require it).
What this means for a 2026 HVAC replacement decision
The federal 25C credit was worth roughly $1,500-$3,200 on a typical heat pump replacement. Without it, the math has changed:
- A heat pump replacement that penciled at “$8,000 net of credit” in 2024-2025 is now $10,000-$11,000.
- An upgrade from older AC to a SEER2-21+ system loses the $600 credit boost — sometimes the upgrade ROI no longer beats a SEER2-15 replacement.
- Income-qualified households (under 150% AMI) should specifically pursue HEAR — at up to $8,000 per heat pump it’s a bigger savings than the old 25C ever was.
If you were planning around 25C and missed the December 2025 deadline, the realistic options now are:
- Income-qualify for HEAR if applicable, and route the project through a HEAR-participating contractor.
- Apply for HOMES based on modeled or measured energy savings — best fit if you’re doing a deeper retrofit (insulation + HVAC + air sealing as a package).
- Stack utility rebates — Oncor / Austin Energy / SECO incentives can still add up to $500-$1,500 depending on equipment.
- Time projects for off-peak quotes — without the tax credit boost, the equipment-and-labor discount you can negotiate matters more.
Common questions
Did OBBBA also kill the geothermal credit?
The 25D Residential Clean Energy Credit (which covered geothermal heat pumps at 30% with no cap) ended for expenditures made after December 31, 2025. Geothermal systems whose installation completed by that date can still claim it. New geothermal projects starting in 2026 cannot.
Can I still get any federal incentive for a 2026 heat pump install?
Not as a tax credit. The only federal money still flowing for heat pumps is through HOMES/HEAR (state-administered, income-restricted for HEAR, savings-based for HOMES). Outside those, the federal incentive is zero.
What about commercial properties or rental properties?
The 25C credit never applied to rental or investment property, so OBBBA changed nothing there. Commercial HVAC installations should consult their CPA about Section 179 / bonus depreciation, which is a different conversation than residential energy credits.
I read on another site that 25C runs through 2032 — is that wrong?
Most of those articles were written between 2022 and mid-2025 (before OBBBA passed) and haven’t been updated. The IRS FAQs page on OBBBA modifications is the current authoritative source.
Important disclaimers
Tax law changes fast, and the OBBBA implementation guidance is still evolving. Before making a purchase decision based on remaining incentives:
- Consult a qualified tax professional for your specific situation.
- Verify current rebate program status at your state energy office and utility company websites.
- Confirm contractor participation if pursuing utility rebates — many require pre-approval.
- Keep documentation of all installations, even ones you don’t immediately claim on, in case program eligibility changes.
This guide reflects current understanding as of May 2026 based on the IRS’s own OBBBA FAQ guidance. It is not tax advice.
Next steps
- If you installed in 2025 — schedule time with your tax preparer to claim 25C on Form 5695 before filing your 2025 return.
- If you’re shopping for 2026 — Our HVAC Cost Estimator gives you Good/Better/Best pricing without the now-stale “30% credit baked in” assumption.
- Considering whether to repair or replace — Without the 25C credit boost on a new system, the repair-or-replace math has shifted. Our Repair or Replace Calculator helps you decide whether to stretch your current unit’s life.
- See the full cost picture — Our HVAC System Cost guide breaks down equipment, labor, and installation costs by system type and home size.
- Plan around your heat pump’s remaining life — How Long Does a Heat Pump Last covers expected lifespans by brand.
- Ready to talk? — Contact us for a free consultation on Texas-specific incentives still available in 2026.
Planning an HVAC upgrade in Central Texas and want to identify every remaining incentive? Texas Temp Masters installs qualifying high-efficiency systems and can advise on Oncor, Austin Energy, SECO, and HEAR program eligibility. Call (817) 704-0706 or visit our contact page to schedule a consultation.
