Replacing your home’s HVAC system is a major investment. Luckily, you may be able to qualify for a federal tax credit that can help you save some money on the replacement process. In this article, we’ll explain what you should know about this federal tax credit program and all the requirements that are necessary to qualify.
Available Federal Tax Credits for HVAC Installations
In 2023, the US began a new federal tax credit program designed to incentivize homeowners to upgrade their HVAC systems to be more energy efficient. The current credits are set to be available until the end of 2032. As of now, this tax credit program is scheduled to run for a few additional years after 2032. However, the total amount of credit you can earn will start to decrease year by year from 2033 onward.
If you want to upgrade your home’s cooling system, you can earn a credit of up to $600 by installing a high-efficiency central air conditioner or ductless mini-split AC system. If you choose to install a central or mini-split heat pump system, you can get credit of up to $2,000. There’s also a credit of up to $600 that’s available when installing a high-efficiency gas furnace. The only thing to note is that you may not be eligible for full credit, as you can only get a maximum credit worth 30% of the installation cost.
You can also get credit for installing a new storage tank or tankless water heater. The credit for either of these units is up to $600 or 30% of the cost of the unit and installation charges as well.
What is SEER?
Seasonal energy efficiency ratio, or SEER, is a rating scale system that measures equipment efficiency. This SEER rating can help you choose equipment that will keep your energy consumption low, reduce your carbon footprint, and allow you to be eligible for federal tax credits. This rating system changed from SEER to SEER2 in 2023.
How to Qualify for an HVAC Tax Credit
The first thing you need to do to ensure you earn the tax credit on your new HVAC unit is make sure it meets the energy-efficiency requirement set out in the credit program. The first requirement is that the unit is ENERGY STAR certified. Depending on the type of unit you’re installing, it may also need to have at least a certain energy-efficiency rating. For 2025, the minimum rating required to earn credit on a new split central AC is 16 SEER2. If you install a packaged AC system, it will automatically qualify as long as it’s ENERGY STAR certified.
The minimum requirement to earn the credit on a new central or ductless heat pump is 15.2 SEER2. However, heat pumps must also have a certain HSPF2 rating, which rates how efficiently they work when heating. The requirement for a central heat pump is 8.1 HSPF2, and the requirement for a ductless heat pump is 8.5 HSPF2.
You can potentially earn the biggest credit if you install any ENERGY STAR-certified geothermal heat pump. That’s because there is no maximum on the credit you’ll get on a new geothermal system. However, the credit on this type of system is still capped at 30% of the installation cost.
The energy ratings we’ve listed only apply to units installed in 2025. That’s because the required rating to earn an ENERGY STAR certification typically increases at least slightly from year to year. A unit that qualifies in 2025 could still qualify if you installed it in 2026, but there’s no way to be sure until the new ENERGY STAR requirements are announced.
Who Should Install Your New HVAC Unit?
An essential thing to note is that you will only receive the tax credit if a licensed HVAC contractor completed the installation. You can also only get the credit when replacing an HVAC unit in an existing home and not when building a new home. Also, the credit is only available when upgrading the HVAC system in your primary residence.
To ensure that your new unit qualifies with the tax credit, you should ask the HVAC contractor to first provide you with the unit’s AHRI certificate or manufacturer’s certificate that shows its energy-efficiency rating. That way you can be fully certain the unit meets the current energy-efficiency requirement to qualify. You should also make sure to keep this certificate. While you’re not required to submit it when you file your taxes, you will need to have proof that your unit qualified should you get audited.
Partner with Experts on HVAC Installations
Since 1999, RW Heating, Air, Plumbing & Electrical has been the top choice for heating and air conditioning in Hernando, MS. If you’re considering an HVAC upgrade, we have a range of excellent options that will qualify you for the tax credit. You can also trust our experts when you need any HVAC repairs or maintenance or for all your plumbing and electrical needs. To get help finding the right replacement HVAC unit for your home or to schedule an appointment for any other service, contact RW Heating, Air, Plumbing & Electrical today.
