Can I claim 25C every year?

Yes. The annual limits reset each tax year. If you install a heat pump in 2026 (claiming $2,000) and a high-efficiency furnace in 2027 (claiming $600), you can claim the credit in both years.

Does the 25C credit cover installation labor?

Yes. The credit covers both equipment and installation costs. The 30% calculation applies to the total invoice, not just the equipment price.

My CPA hasn't heard of the 25C changes — what do I tell them?

Direct them to IRS Form 5695 instructions (updated for the Inflation Reduction Act) and the ENERGY STAR website's federal tax credit page. The 25C revisions took effect January 1, 2023, and run through December 31, 2032.

25C Tax Credit for HVAC — Up to $2,000 Back

The federal 25C tax credit offers up to $2,000 for heat pumps and $600 for furnaces and ACs — here's how to claim it.

Get a Free Quote (828) 252-8544

NATE-certified20+ years24/7 service

(828) 252-8544

Professional 25C Tax Credit for HVAC — Up to $2,000 Back in Asheville & Western NC

Section 25C: The HVAC Homeowner's Best Friend

The Energy Efficient Home Improvement Credit (Section 25C of the Internal Revenue Code, as revised by the Inflation Reduction Act) is the most accessible federal incentive for WNC homeowners upgrading their HVAC systems. It covers 30% of equipment and installation costs up to annual caps, and it's available every year through 2032. You don't need to be a tax expert to take advantage of it.

How Much You Can Get Back

Heat pumps (air-source, ground-source, or ductless): 30% of cost, up to $2,000/year. This is the single most generous residential HVAC incentive available. Central air conditioners (meeting efficiency requirements): 30% of cost, up to $600/year. Gas furnaces (97%+ AFUE): 30% of cost, up to $600/year. Important: The $2,000 heat pump cap and the $600 AC/furnace cap are separate annual limits. If you install a qualifying heat pump AND a qualifying furnace in the same year, you can potentially claim up to $2,600.

What Qualifies in 2026

Not all HVAC equipment qualifies — it must meet specific efficiency thresholds. Air-source heat pumps: SEER2 ≥ 16, HSPF2 ≥ 8.1, EER2 ≥ 12. Central ACs: SEER2 ≥ 16 (split systems), ≥ 15.2 (single package). Gas furnaces: AFUE ≥ 97%. The equipment must also be certified by an AHRI-listed manufacturer. Quality Comfort specifies qualifying equipment and provides the required manufacturer certification with every qualifying installation.

Claiming the Credit: Step by Step

Step 1: Install qualifying HVAC equipment (we handle this). Step 2: Keep your installation receipt and the manufacturer's certification statement (we provide this). Step 3: When filing your taxes, complete IRS Form 5695 (Residential Energy Credits). Step 4: Transfer the credit amount to your Form 1040, reducing your tax liability. The credit is non-refundable — it reduces what you owe but won't generate a refund below zero. Consult your tax advisor for your specific situation.