Federal 25C HVAC Tax Credit: 2026 Status

Let's lead with the headline, because it is the single most important thing to know and a lot of outdated articles will tell you otherwise: the federal 25C HVAC tax credit ended for equipment placed in service after December 31, 2025. If you are installing a furnace, air conditioner, or heat pump in 2026, you do not get the 25C credit. It is gone for new installs.

This matters because homeowners are still being told - by old blog posts, by well-meaning neighbors, sometimes even by salespeople who have not updated their pitch - that they can knock $2,000 off a heat pump with a federal credit this year. That is no longer true, and budgeting around a credit that does not exist is a painful way to find out. This article lays out what the credit was, who can still claim it, and what actually offsets an HVAC replacement in 2026.

What happened

The 25C Energy Efficient Home Improvement Credit was ended early by the One Big Beautiful Bill Act, signed in July 2025. Under that law, the credit terminates for qualifying equipment placed in service after December 31, 2025. "Placed in service" is the operative phrase - it generally means the date the equipment was installed and ready for use, not the date you ordered it or paid a deposit.

So the line is clean: on or before December 31, 2025, the credit may still apply. January 1, 2026 and later, it does not.

What the credit was worth (for those who still qualify)

For equipment placed in service on or before December 31, 2025, the credit followed these limits. If that describes your situation, this is what you may be able to claim on your 2025 return.

A couple of details that trip people up. The $1,200 annual cap applied to the non-heat-pump items as a group (things like furnaces, AC, and certain other efficiency improvements). Heat pumps sat in a separate bucket, which is how the combined ceiling could reach $3,200 in a single year when a heat pump was involved. These were nonrefundable credits, meaning they reduced your tax owed but did not pay out beyond it.

Who can still claim it

You may still be able to claim the 25C credit if all of the following are true:

• Your qualifying equipment was installed and placed in service on or before December 31, 2025.
• The equipment met the efficiency requirements that were in force at that time.
• You claim it on your 2025 federal tax return using IRS Form 5695.

If you had a furnace, AC, or heat pump go in during 2025 and you have not yet filed your 2025 return, do not forget this. Pull your invoice, note the in-service date, and bring it to whoever prepares your taxes.

If your equipment went in during 2026, none of this applies to you. There is no version of the 2026 timeline where a new install earns the 25C credit.

An honest disclaimer

We build and sell nobody's tax returns, and tax situations vary. The description above is general information, not tax advice. Confirm your eligibility and the exact amounts with a qualified tax professional, and verify the current rules directly at IRS.gov, including the instructions for Form 5695. The details of who qualifies, what counts as placed in service, and how the caps interact can hinge on specifics we cannot see from here.

What 2026 buyers rely on instead

The end of 25C does not mean a 2026 HVAC project comes with zero help. It means the help now comes from your utilities rather than the IRS. For most North Shore homeowners, that is two possible sources:

• ComEd heat pump rebate. On the electric side, ComEd offers a rebate for qualifying cold-climate heat pumps, roughly $1,400 to $2,000 as a planning figure, tonnage-tiered as of March 1, 2026, and requiring a trade-ally installer. Details are in our heat pump cost and rebates guide.
• Nicor Gas (or North Shore Gas) rebates. On the gas side, roughly $225 for a qualifying 97% AFUE furnace, up to ~$500 for a combi boiler, and up to ~$100 for a smart thermostat, with filing windows to watch. The full walk-through is in our ComEd and Nicor rebate guide.

Those two programs are what a 2026 buyer should be planning around. They are real, they are current, and they change - so verify amounts before you count on them.

Should the credit's end change your decision?

Not really, and here is the honest take. The 25C credit was a nice bonus, but it was never the reason a heat pump or a high-efficiency furnace made sense. The reasons that still hold - lower operating costs, better comfort, replacing equipment that is failing or unsafe - have not changed. If your furnace is on its last legs, the right move is still to replace it with the right equipment for your home, capture the utility rebates that remain, and not wait around for a federal credit that is not coming back this year. Our repair or replace your furnace guide can help you time that decision.

When you are ready to see real numbers for your home - including which utility rebates you actually qualify for - request a free estimate or call (847) 752-4418. A licensed, insured installer will give you a written quote, and we will always point you to your tax professional and IRS.gov for anything on the tax side.