Most homeowners know investing in a high-efficiency HVAC system increases comfort and lowers energy bills. But, thanks to tax incentives, ROI could also include extra money in your pocket via rebates and tax credits.
In this post, we’ll explain exactly how these incentives work and discuss why 2025 is a great time to take advantage.
Understanding Incentives: Rebates and Tax Credits
HVAC manufacturers and some local utility companies offer cash‑back incentives when you replace an old, inefficient system with an ENERGY STAR®–rated model. Additionally, the federal government allows homeowners to claim tax credits when making qualifying improvements.
Manufacturer and Utility Rebates
Manufacturer and utility rebates typically range from $300 to $1,500, depending on your new unit’s efficiency rating (SEER2, UEF, HSPF2) and your utility provider’s specific rebate program.
To claim your manufacturer rebates, look for national or regional promotions from leading brands or work with an authorized dealer (like Hoock’s!) to confirm eligibility. Typically, you’ll need to submit documents that show proof of purchase and installation. We can help with that.
Federal Section 25C Tax Credits
In addition to the rebates outlined above, Section 25C of the Internal Revenue Code provides homeowners with a tax credit equaling up to 30% of the cost of qualified improvements. Please note these incentives apply to primary residences only.
Products must meet specific IRS-defined efficiency requirements (SEER2, HSPF2, AFUE) and not just ENERGY STAR certification (most, but not all ENERGY STAR–rated systems qualify). The efficiency requirements are:
- Central air conditioners: SEER2 ≥ 16
- Furnace: AFUE ≥ 97%
- Heat pumps: SEER2 ≥ 15.2 and HSPF2 ≥ 7.8 for split systems, SEER2 ≥ 15.2 and HSPF2 ≥ 6.7 for package systems
If the technical jargon, acronyms, and efficiency ratings seem intimidating, don’t worry. Your Hoock’s comfort consultant will cover all relevant details before you make any purchase decisions, allowing you to make an informed choice that’s best for your situation.
Since 25C credits directly reduce your federal tax liability, many homeowners will see a reduced tax bill or increased refund when they file taxes. Keep in mind that you must claim these credits during the tax year in which the system is installed, not purchased.
There is a $1,200 combined cap for eligible improvements, like central AC, furnaces, insulation, and electrical upgrades.
Heat Pumps Are a Tax Credit Winner
More homeowners than ever are choosing heat pumps over traditional air conditioners because they offer heating and cooling in one reliable and efficient system.
If you’re considering an upgrade, we’ve got good news: you can enjoy significant savings by investing in an American Standard Heat Pump. Right now, homeowners can claim a $2,000 federal tax credit, making this high-performance upgrade more affordable than ever.
The $2,000 credit can be paired with additional credits for maximum savings. For example, if you install a qualifying air conditioner ($600 tax credit) in a detached garage and a new heat pump system in your home ($2,000 tax credit), you can save $2,600 overall!
Why 2025 Is an Optimal Time to Install a New HVAC System
Today’s homeowners, regardless of their income levels, are seeking ways to save amid economic uncertainty. Combining generous federal tax credits with manufacturer and utility rebates is one way to reduce costs on a home investment that will benefit you and your family for up to 20 years.
There’s another reason why you should act now if you’ve been considering an upgrade: incentives often change based on annual funding and evolving legislation. Installing a new system this year means locking in the best cost-saving incentives before potential demand spikes or budget tightening.
The final reason 2025 is a great time to invest in cutting-edge heating and AC systems is the technology itself. HVAC equipment standards shifted in 2023, meaning today’s systems adhere to higher efficiency levels using updated SEER2, HSPF2, and UEF ratings.
Now, let’s walk through a six-step plan that makes upgrading easy.
Step 1: Audit Your Current System
If you’ve recently moved into a new home or haven’t updated your HVAC system in 10+ years, it’s crucial to review all components and identify areas for improvement.
Step 2: Research Incentives in Your Area
Check your utility company’s website and ENERGY STAR’s rebate finder. Take note of deadlines and documentation requirements like proof of purchase and contractor invoices.
Step 3: Select Qualified Equipment
To ensure you qualify for the maximum rebates and tax credits, choose an ENERGY STAR–certified model that meets or exceeds SEER2/HSPF2 criteria. If you have any questions, get in touch with us – we’re more than happy to help!
Step 4: Choose a Contractor You Trust
It matters who you choose for your HVAC upgrade. The expert technicians at Hoock’s Heating & Cooling will review your needs, offer recommendations, and provide a comprehensive estimate. For your peace of mind, we even offer a 10-year warranty on parts and labor for every new installation.
Step 5: Promptly Submit Rebate Applications
Rebate programs typically operate on a first‑come, first‑served basis. The sooner you submit your applications after installation, the sooner you can enjoy your savings!
Step 6: Claim Your Tax Credit
Make sure to store your receipts and manufacturer’s certification statements in a safe place. Then, when tax season rolls around, complete IRS Form 5695 along with your tax return to claim the Section 25C credit.
Hoock’s Heating & Cooling Is Your Partner in Cost-Efficient Comfort
Any HVAC company can install a heating or AC system. Our commitment to ongoing service and the relationships we build with our friends and neighbors set us apart.
Contact us today if you’re ready to upgrade your system and take advantage of rebates and tax credits.