Guide · 9 min read · Updated 2026-04-27
Federal HVAC Tax Credits: What Ended After 2025
The federal §25C HVAC tax credit is no longer available for property placed in service after December 31, 2025, according to current IRS guidance. State-administered HEAR / HEEHRA rebates can still matter in 2026, but eligibility and launch status vary by state.
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The two programs: tax credit vs point-of-sale rebate
The IRA created two different federal HVAC incentive tracks, but they now have different current status.
§25C (Energy Efficient Home Improvement Credit) was a federal income-tax credit claimed on a tax return. Current IRS guidance says no credit is allowed for property placed in service after December 31, 2025.
HEAR / HEEHRA (Home Electrification and Appliance Rebates) is a point-of-sale rebate path administered by each state's energy office. It is limited to households at or below 150% of Area Median Income (AMI), and rollout continues state by state.
- §25C: expired for property placed in service after December 31, 2025 under current IRS guidance
- HEEHRA: up to $8,000 for a qualifying heat pump for <150% AMI households
- HEEHRA funds are capped per state and phasing in; check your state energy office
§25C: expired for current installs
For 2025 and earlier qualifying projects, §25C generally allowed 30% of eligible heat-pump costs up to a $2,000 annual heat-pump category limit. For current projects, do not count this credit unless a qualified tax professional confirms your equipment was placed in service before the cutoff and otherwise qualifies.
The IRS Form 5695 instructions are the source of truth for past-year filing. For 2026 budgeting, treat §25C as $0 unless the law changes.
HEEHRA: the $8,000 income-qualified rebate
HEEHRA / HEAR is funded by IRA section 50122 and distributed to state energy offices. Each state designs its rollout, so availability depends on your state and local program administrator.
Rebate amounts depend on household income relative to Area Median Income (AMI):
- Households under 80% AMI: up to 100% of project cost covered, $8,000 max for heat pumps
- Households 80–150% AMI: up to 50% of project cost, $4,000 max for heat pumps
- Households over 150% AMI: not eligible for HEEHRA; current §25C savings should not be assumed
- Additional HEEHRA allocations: $1,750 heat pump water heater, $840 electric cooktop/oven, $1,600 insulation/air sealing, $4,000 electrical panel upgrade
- Whole-home cap: $14,000 per household across all HEEHRA categories
Income eligibility: how AMI is calculated
AMI is set annually by HUD at the metropolitan statistical area level. As of 2026 in major metros, 80% AMI for a family of four is roughly:
- New York, NY: $119,000 (80% AMI, family of 4)
- San Francisco, CA: $149,000
- Seattle, WA: $119,000
- Portland, OR: $83,000
- Atlanta, GA: $70,000
- Chicago, IL: $82,000
- Dallas-Fort Worth, TX: $77,000
- Phoenix, AZ: $72,000
Stacking: which incentives combine
For current projects, think about stacking as state program + utility program + any local program that explicitly allows combination. Do not add a federal §25C amount to 2026 estimates unless your tax advisor confirms a qualifying pre-2026 placed-in-service date.
HEEHRA / HEAR rebates are income-qualified and state-administered; utility rebates vary by service territory. Total incentives generally cannot exceed the project cost, and some state programs impose stricter stacking rules.
How to document an older §25C claim
Six-step process:
- 1. Keep all documentation: itemized invoice, manufacturer certification statement, AHRI certificate, proof of ENERGY STAR cold-climate certification if applicable
- 2. Confirm equipment meets CEE Highest Efficiency Tier at cee1.org
- 3. Complete IRS Form 5695 only for the tax year in which the property was eligible and placed in service
- 4. Enter the credit amount on Schedule 3, then Form 1040
- 5. File electronically via IRS Free File, commercial tax software, or a CPA
- 6. Retain records for 3 years in case of audit — manufacturer cert, invoice, AHRI cert
How to apply for HEEHRA
HEEHRA is state-administered, so the process varies — but the core steps are similar:
- Find your state's energy office HEEHRA portal (e.g. WA Dept of Commerce, Oregon DOE, NYSERDA in NY, CEC in California)
- Verify income eligibility — most states use a self-attestation form plus prior-year tax return
- Get quotes from HEEHRA-approved contractors (approved-installer list maintained by state)
- Submit rebate pre-authorization (in most states, required before install)
- Contractor applies the rebate as a point-of-sale discount
- Retain receipts; no separate IRS filing needed for HEEHRA (it's not a tax credit)
- If your state hasn't launched HEEHRA yet as of your install date, you generally can't retroactively claim that state-administered rebate after install