HVAC Incentives Repeal: Everything You Need to Know Posted on July 10, 2025 The US Senate and Congress recently passed the Big Beautiful Bill, which removes federal tax credits for energy efficient HVAC systems and other home improvements. We discuss what the repealed incentives are, and how it can affect both consumers and contractors. What Incentives Are Repealed? On July 2, 2025 both the US Senate and House of Representatives voted to pass H.R. 1, more commonly known as the “Big Beautiful Bill Act”. The bill repeals certain sections of the Inflation Reduction Act (IRA) of 2022, which provided tax incentives to encourage consumers to upgrade to more energy efficient HVAC systems. The four federal tax credits being repealed are: Section 25C, Energy efficient home improvement credit – provided up to $3,200 annually for qualifying home upgrades Section 25D, Residential clean energy credit – allowed for 30% federal tax credit for geothermal heat pumps Section 45L, Tax credits for builders of energy efficient homes – provided tax credits up to $2,500 for homebuilders and developers who build or substantially rebuild energy-efficient residential homes Section 179D, Energy Efficient Commercial Buildings Tax Deduction – provided tax deductions for building owners and designers who implement energy-efficient improvements for commercial buildings by at least 25%. What are the Effects? For consumers: Tax credits for energy efficient home improvements and geothermal heat pumps will no longer be available after the end of 2025. If you have a home improvement project, or if you are considering switching to a geothermal heat pump, we recommend doing so before the end of the year to qualify for the incentives. For commercial building owners: Tax deduction for energy efficiency improvements to the building will no longer apply if the project starts after June 30, 2026. This gives you roughly one year to implement measures that improve energy consumption by at least 25% to qualify for tax deduction. For contractors: Tax credits for new or major rebuilds of energy efficient homes will no longer apply by July 2026. This provides roughly a one-year timeframe to construct or substantially rebuild energy efficient homes and snag those tax credits. Bottomline If you are considering energy efficient home improvements, we recommend doing so at the earliest opportunity to avail of the tax incentives before the deadline. To help you maximize your investment, we carry high energy efficiency HVAC systems that not only provide incentives but result in long-term utility savings. Check out our guides to energy efficient home products: Energy Efficient AC Units Our Most Energy Efficient Heaters 6 Energy Efficient Water Heaters – Tankless & Storage Tank Mickey Luongo Mickey is the resident heating and air conditioning expert with over 15 years of experience in the industry.
