2025 Is Your Last Chance to Claim Federal HVAC Tax Credits
Act Now Before Funding Runs Out!
If you’re considering upgrading your heating, cooling, or electrical systems, don’t wait—2025 is the year to act. Federal HVAC tax credits for home energy improvements are being phased out at the end of this year—and rebate programs will likely increase in popularity, which can affect the remaining funding balance available for these programs.
At Hoveln Heating & Cooling Inc., we’re here to help you navigate these changes and make the most of the available savings while they last.
Why 2025 Is a Crucial Year for HVAC Installation Incentives
Thanks to the Inflation Reduction Act (IRA), approved by Congress in 2022, homeowners have access to:
- State-offered rebates at the point of sale that can immediately lower your project costs.
- Federal tax credits (Sections 25C and 25D) of up to 30% for qualifying home upgrades.
However, the 2025/26 federal budget adopted in July will sunset both 25C and 25D on December 31, 2025—so this is the last year taxpayers can claim these credits. The IRA legislation also established a set amount of funding for state-run rebate programs.
These rebate programs will be offered until funding is used up or until September 30, 2031, whichever comes first.
That means your home improvement project must be completed and placed in service before the end of 2025 to qualify for the tax credit, and as soon as possible to ensure funding is still available for the rebate programs.
HVAC Tax Credits and Rebates: What’s Covered
A lot of changes have been made regarding tax credits and the establishment of rebate programs, so here is a simple breakdown of what to expect for the rest of this year.
Available Tax Credits: 25C and 25D (Expiring 12/31/25)
The following home upgrades can qualify you for select tax credits:
- Air Conditioners and Furnaces: Up to $600
- Heat Pumps: Up to $2,000
- Insulation: Up to $1,200
- Energy Audits: Up to $150
- Solar, Battery Storage, and Geothermal: 30% of costs with no cap (25D)
To claim tax credits for any of these home upgrades, file IRS Form 5695 with your 2025 tax return. These credits are non-refundable, but can reduce your tax liability. Be sure to speak with a tax expert about your eligibility and how to file for this HVAC and home improvement incentive correctly.
Due to government regulation, this information can change after the blog is published. Speak to a professional to verify available rebates and tax credits.
Rebates (Home Energy Rebates Program)
Depending on your state and the model of energy-efficient appliance you select, you may be eligible for one of the income-based Home Energy Rebate Programs. These programs are the Home Efficiency Rebates Program (HOMES) and the Home Electrification and Appliance Rebates Program (HEAR), and individual state energy offices will be administering them.
The National Association of State Energy Officials (NASEO) tracks the status of each program by state. It is an excellent resource to follow for more information about Illinois’s participation, including the state’s energy website for additional program and rebate application information.
Under these programs, you may be eligible for point-of-sale rebates on the following home improvement projects:
- Heat Pumps: Up to $8,000
- Electric Panel Upgrades: Up to $4,000
- Home Wiring: Up to $2,500
- Insulation and Air Sealing: Up to $1,600
- Electric Appliances (oven, dryer): Up to $840 each
The District of Columbia, Georgia, Indiana, Michigan, and North Carolina have launched both rebate programs. Arizona, California, Colorado, Maine, New Mexico, New York, Rhode Island, and Wisconsin have launched the HEAR program and have the money approved for the HOMES program.
Not all states have enacted a Home Energy Rebates Program—or plan to participate. Other states that have received approval for one or both rebate programs expect to launch them sometime in 2025.
Get Ahead of the Rush to Avoid Missing Out
Rebates are first come, first served, especially now that federal support is winding down and state funding is not expected to be replenished. Delays in planning or installation could result in missed opportunities if funding dries up.
With federal tax credits set to expire at the end of December, there is limited time remaining to have a qualifying improvement to earn the tax credit on your 2025 return.
Start your project as early as possible before the year is up to lock in your savings while these incentives are still available.
Hoveln Heating and Cooling Is Here to Help
We’re monitoring the state’s rebate program developments and can advise you on qualifying upgrades. Whether you need a heat pump, ductless mini split, or a high-efficiency AC, we’ll help you maximize your rebate and credit potential before time runs out.
Call us today at 217-643-2125 or request service online to schedule a consultation and secure your savings.
Frequently Asked Questions About Federal Tax Credits and Rebates
Are rebates and credits still available in 2025?
Yes—for now. Tax credits expire at the end of 2025, and rebates are expected to continue while funding is available or until September 30, 2031 (whichever occurs first).
Can I get both a rebate and a tax credit?
Yes, you can combine rebates and tax credits for the same project—but you can’t receive rebates from both the HOMES and HEAR programs for the same upgrade.
Do income limits apply for home energy improvement rebates?
Yes, there is an income qualifier that affects the total rebate you can receive. Typically, you can expect these rates as general program guidelines:
- Low-income households—those making below 80% of their area median income (AMI)—are potentially eligible to have 100% of their costs covered up to a state-placed cap.
- Moderate-income households—those making over 80% of their AMI—could get up to 50% of their costs covered up to a state-place cap. Some states may define this as over 80% but under 150% of AMI.
You can see a summary of state-by-state qualifications and limitations on NASEO.
Do income limits apply to qualify for federal tax credits on home energy improvements?
No, income limits do not apply to federal tax credits.
How do I know if my upgrade qualifies?
Talk to our experts! We’ll help you determine what upgrades qualify and assist you with paperwork for credits and rebates.
Don’t Miss This Window of Opportunity
After 2025, these federal tax credits will be gone for good and the rebates will last while they last! Take control of your Champaign, IL, home’s energy use, lower your utility bills, and increase comfort—all while getting the best value before time runs out.
Make 2025 the year you upgrade—and save. Call Hoveln Heating and Cooling at 217-643-2125 or request service online.