Don’t Miss Out: The Phase-Out of HVAC Energy Efficient Home Improvement Credits

Key Takeaways

• Federal tax credits for energy-efficient heating, cooling, and clean energy projects are set to end after December 31, 2025.
• Homeowners can currently save up to 30% of project costs, with credits of up to $2,000 for heat pumps and more for other upgrades.
• To qualify, systems must be fully installed and operational before the deadline, contracts or down payments alone don’t count.
• Delaying until late 2025 could mean longer wait times, higher demand, and potential supply chain challenges.
• Replacing an older or inefficient system before the phase-out ensures you lock in incentives, lower energy bills, and avoid the year-end rush.

For the past several years, federal tax credits, specifically the Energy Efficient Home Improvement Credit, have helped make heating and cooling system replacements a little easier on homeowners’ budgets. Choosing energy-efficient options, especially heat pumps and high-SEER air conditioners, often meant unlocking meaningful tax savings while lowering monthly energy use.

Those incentives won’t be around forever. Many of the most valuable Energy Efficient Home Improvement Credits are scheduled to end after 2025, and current updates suggest they won’t return in the same form. For anyone considering whether to replace a system now or wait, this timeline could make a big difference.

This blog looks at why these credits were created, what’s changing, and why planning ahead in 2025 is the smartest move.

Why Tax Credits Exist in the First Place

Federal credits for heating and cooling upgrades were introduced to encourage homeowners to choose energy-efficient systems. Offsetting part of the upfront expense made it easier to invest in newer technology like heat pumps, high-efficiency furnaces, and advanced central air systems.

The goal went beyond helping families save money. Cutting energy use eases demand on the grid and reduces greenhouse gas emissions. The programs were designed to be a win-win: lower household costs while supporting a cleaner and more efficient future.

What’s Changing in 2025

The current set of incentives comes from recent legislation, and many expire soon. Here’s what to know:

Energy Efficient Home Improvement Credit (Section 25C)]

• Ends December 31, 2025
• Covers 30% of the cost of qualified upgrades
• Annual caps: $2,000 for a heat pump or heat pump water heater and up to $1,200 for improvements like insulation, doors, windows, energy audits, and panel upgrades
• Maximum combined annual benefit: $3,200
• Starting in 2025, only systems from a qualified manufacturer will be eligible, and homeowners must include the manufacturer’s Qualified Manufacturer Identification Number (QMID) on their tax return
• To qualify, the system must be fully installed and operational by December 31, 2025, a contract or down payment alone won’t count

Residential Clean Energy Credit (Section 25D)

• Ends December 31, 2025
• Covers 30% of the cost of renewable systems such as solar panels, solar water heaters, battery storage, and geothermal heat pumps
• No dollar cap, so larger projects can create significant savings
• As with Section 25C, projects must be fully completed and operational by the deadline

What “Placed in Service” Really Means

A key detail to understand is the IRS requirement that systems be “placed in service” by the deadline. This means fully installed, inspected if necessary, and ready for use. Ordering equipment or making a partial payment is not enough.

That requirement makes timing critical. Replacements often involve permits, parts, and scheduling with installers, which can extend timelines. Waiting until late 2025 could mean running into supply delays or finding contractors already booked with homeowners trying to meet the same deadline. Missing the cutoff by even a short time could mean losing out on thousands in credits.

What This Means for Homeowners

For homeowners with older or inefficient systems, the phase-out raises the urgency of a decision that may already be coming. Once credits are gone, the full cost of equipment and installation falls to the homeowner. Even with financing, losing out on a $2,000 credit for a heat pump or a 30% credit on a clean energy project is a significant change.

Demand is also likely to surge as the deadline nears. That could mean longer waits for installation, higher prices from supply chain pressure, or projects not being finished before December 31, 2025. Rising energy costs add another layer, keeping an outdated system means higher monthly bills, and waiting only extends those expenses.

Signs It’s Time to Replace Your System

If you’re on the fence about replacing your system now or later, consider how it’s performing. Equipment that’s 10 to 15 years old, systems that struggle to keep your home comfortable, or units that require frequent repairs are clear warning signs. Rising utility bills, strange noises, and uneven performance are other red flags. Pair these issues with the approaching end of tax credits, and it becomes clear that 2025 offers a unique chance to save.

Why Acting Now Makes Sense

Replacing a system before credits expire ensures you get the maximum return on your investment. Beyond the credits, benefits include lower bills, more consistent comfort, and peace of mind knowing your home is protected against breakdowns in extreme weather. Acting early also avoids the rush that’s almost certain to build in the second half of 2025.

How Mint Home Simplifies the Process

Replacing a heating and cooling system can feel overwhelming, especially with deadlines and paperwork in the mix. At Mint Home, we’ve built a process that takes the stress out of it. Instant online quotes provide upfront pricing without delays, and our transparent approach means no hidden fees. With next-day installation options, flexible financing, and expert technicians, we make it straightforward to move forward well before the deadline.

Don’t Miss Your Window

Tax credits have provided homeowners with valuable savings, but they are set to disappear at the end of 2025. Without renewal, waiting could mean losing thousands in incentives.

If your system is aging, inefficient, or showing signs it’s nearing the end of its life, now is the time to plan ahead. By replacing your HVAC system in 2025, you can lock in the remaining credits, enjoy lower bills, and avoid the year-end scramble.

Get started today with a free Mint Home quote and take advantage of these savings while they’re still available.