Last reviewed: September 2026 · By the HVAC Brief Editorial Team · Our sourcing and editorial standards
The Section 25C credit expired for anything placed in service after December 31, 2025. A qualifying heat pump that would have earned up to $2,000 off a 2025 tax bill earns nothing federally in 2026.
Installation date controls, not purchase date. Equipment bought in late 2025 but installed in January 2026 does not qualify. State and utility rebates are separate and unaffected.
For homeowners this is a straightforward price increase of up to $2,000 on the same job, arriving in the same year equipment prices set new highs. For contractors it removes a closing tool that had been doing quiet work in a lot of proposals.
What the credit was
The Energy Efficient Home Improvement Credit under Section 25C covered qualifying energy efficiency improvements, with a maximum annual credit of $2,000 for heat pumps, heat pump water heaters and qualifying biomass equipment. The IRS states the credit applies to qualifying property placed in service on or after January 1, 2023 and before December 31, 2025.
The date that matters is when the equipment was placed in service. That is the installation, not the invoice and not the order. A system paid for in November 2025 and commissioned in February 2026 falls outside the credit.
A system placed in service on or before December 31, 2025 can still be claimed on the 2025 return. For 2025 specifically the IRS also requires that the item was produced by a qualified manufacturer and that the taxpayer reports the Qualified Manufacturer Identification Number, so keep that paperwork with the invoice.
What it means for a 2026 quote
Put the two changes together and the swing is larger than most homeowners realise. Equipment producer prices are up 60% since 2019 against 31% for consumer prices generally, and the federal credit that used to take up to $2,000 off the top is gone. A homeowner comparing a 2026 quote against a memory of their last replacement is comparing across both shifts at once.
| Same job, different year | 2025 | 2026 |
|---|---|---|
| Federal 25C credit on a qualifying heat pump | Up to $2,000 | $0 |
| What controls eligibility | Placed in service by Dec 31, 2025 | Not available |
| State and utility rebates | Unaffected | Unaffected |
What still works
State and utility programmes are separate from the federal credit and did not expire with it. They are also routinely worth more than homeowners assume, and they vary enormously by utility rather than by state, so a neighbouring town can have a materially different offer. Check the specific utility before concluding there is no incentive available.
For contractors the practical move is to stop treating incentives as a footnote at the end of the proposal. If the federal credit is gone, the rebate research you do on the customer’s behalf becomes a differentiator rather than an afterthought.
Methodology
Credit terms and dates are taken from the IRS page for the Energy Efficient Home Improvement Credit. Price context uses BLS producer price index series PCU333415333415 for HVAC equipment manufacturing and CUUR0000SA0 for consumer prices, each indexed to its 2019 annual average.
Limitations
- This is general information, not tax advice. Individual eligibility depends on circumstances a publication cannot see. Confirm with a tax professional.
- We do not list state or utility programmes because they change frequently and vary by utility. Any list we published would be wrong somewhere within weeks.
- The $2,000 figure is the maximum annual credit for qualifying heat pumps, not a guaranteed amount.
Frequently asked questions
Is there a federal heat pump tax credit in 2026?
No. The Section 25C credit applies to property placed in service before December 31, 2025.
I bought the equipment in 2025 but it was installed in 2026. Do I qualify?
No. Eligibility runs on the date the property was placed in service, which is the installation, not the purchase.
I installed in 2025 but have not filed yet. Can I still claim it?
Yes. A system placed in service by the deadline can be claimed on your 2025 return. For 2025 the IRS also requires a Qualified Manufacturer Identification Number to be reported.
Are rebates gone too?
No. State and utility rebates are separate from the federal credit and are unaffected by its expiry.
Sources
- Internal Revenue Service, Energy Efficient Home Improvement Credit, Section 25C.
- US Bureau of Labor Statistics, Producer Price Index by Industry, series PCU333415333415, and Consumer Price Index for All Urban Consumers, series CUUR0000SA0, retrieved via the BLS Public Data API v2.
The HVAC Brief is an independent trade publication. Nothing here is tax advice. Corrections welcome.
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