OBBBA’s HVAC Scorecard: Tax Wins, Incentive Losses

A federal law passed last year, the One Big, Beautiful Bill Act, ended several tax breaks that had helped homeowners pay for efficient heating and cooling equipment. The biggest loss for homeowners is the Section 25C credit, which had offered up to $2,000 back for installing a qualified heat pump, and up to $600 each for a high-efficiency furnace or air conditioner. Also gone is the Section 25D credit, which covered geothermal systems and solar power, and a credit builders used for constructing energy-efficient new homes. More than 2.3 million households claimed the 25C credit in 2023, including nearly 268,000 for heat pumps specifically, according to the U.S. Treasury.

Industry groups call the loss of these credits a real setback, especially combined with rising equipment prices. Still, shipment data so far doesn't show a clear drop-off: residential heat pump shipments were actually up 3.8% in the first half of this year compared with the same period last year, when the credit still existed. Furnace shipments were down 6.2%, and air conditioner shipments were up 2.4%, though these figures don't separate out equipment that would have qualified for the credit.

The law's other major changes mostly affect HVAC businesses and worker training rather than homeowners directly, including permanent tax deductions for contractors and new ways to fund trade-school education. If you were counting on a federal tax credit to offset the cost of a heat pump or similar upgrade, that credit is no longer available, so it's worth checking whether your state offers its own rebate or incentive instead.