Important news to pass on to your customers: If they’re thinking about installing high-efficiency HVAC systems, heat pumps, furnaces and the like to make their home more energy-efficient, now is the time to do it. The window for qualifying for the tax credits that cover these home improvements, which became available under the Inflation Reduction Act, is closing.

The Federal 25C Tax Credits expire December 31, 2025.

This cutoff date is significant because as of January 1, 2026, homeowners will no longer be eligible for the credit, which can defray up to 30% of the cost of their new units — including installation costs. It can add up to $2,000 for heat pumps and heat pump water heaters or up to $1,200 for other improvements like energy-efficient furnaces and central air conditioners.

For many homeowners, it can mean the difference between affording to upgrade their home, or not.

Here are the basics of what these tax credits cover:

• The customer must own their home and use it as their primary residence.
• It does NOT apply to new construction.
• Landlords may not claim the credit for properties they do not live in.
• Systems must be fully installed and operational by the end of the day on December 31, according to the IRS. Just ordering it isn’t enough.
• The $2,000 tax credit (or 30% of the entire cost of installation) covers air source heat pumps, heat pump water heaters, biomass stoves or boilers.
• The $1,200 tax credit (or 30% of the entire cost of installation) covers water heaters, furnaces, boilers, central air conditioners and things like doors and skylights.
• It’s not either-or. Homeowners installing, say, a new door and skylights AND a heat pump can claim both of the credits.

What it Means for You

A few strategies for you to make the most of the last few weeks of this program:

• Encourage your customers to take advantage of this opportunity, which may not come around again.
• Create a year-end promotion to let your customers know this window is closing.
• Only take orders for systems you can install by December 31. Remember, according to the IRS, the units must be installed and fully operational by the end of that day in order to qualify.
• Adopt an all-hands-on-deck policy and give your workers a little extra in their Christmas stockings for their hard work.

For more detailed information about eligibility for this program, read “2025 Federal Tax Credit Eligibility Update” in our news hub.