The 25C Heat Pump Tax Credit Ended After 2025: What Alabama Homeowners Should Know
The federal 25C heat pump tax credit expired December 31, 2025. What that means for Baldwin County homeowners — and what's still available now.
The federal 25C Energy Efficient Home Improvement Credit — the credit that helped offset the cost of a qualifying heat pump in your primary residence — expired on December 31, 2025. The 2025 federal budget law set that hard cutoff. If you're weighing a heat pump install in 2026, the 25C credit is no longer part of the math, and any quote, ad, or older article still promising it for a current install is out of date.
That's the headline. The rest of this post covers the one situation where the credit still matters, what's replaced it, and why a heat pump can still be the right call in Baldwin County without it. This is general guidance, not tax advice — confirm your specific situation with a CPA or qualified tax preparer.
The one case where 25C still applies
If you completed a qualifying heat pump installation in your primary residence on or before December 31, 2025, you can still claim the credit on your 2025 federal return — the one you file in 2026. That's the only remaining use. A system installed in 2026 or later does not qualify, regardless of efficiency.
If that's you, keep three documents in your tax file:
- Contractor invoice showing the date the equipment was placed in service (placed in service means installation completed, not the date you signed the contract).
- AHRI Certificate of Performance for the matched indoor + outdoor system.
- Manufacturer's certification that the equipment qualified.
The credit is claimed on IRS Form 5695 (Residential Energy Credits). Without the AHRI certificate specifically, a claim can be denied at audit even if the equipment really did qualify — so don't discard it.
What is no longer true
Be skeptical of anything — including earlier versions of this page — that still says:
- A 2026 install qualifies for 25C. It does not.
- You can stack the federal 25C credit with current manufacturer promotions. The federal credit is gone for new installs; only the promotions remain.
- There's a federal dollar-for-dollar credit waiting at tax time for this year's heat pump. There isn't, at the federal 25C level.
What's still available in 2026
Losing the federal credit doesn't change the core case for a heat pump in our climate — that case never depended on it. And several real programs remain:
- Utility programs. Alabama Power and TVA EnergyRight both run residential efficiency and heat-pump incentive programs, and many local co-ops do too. Terms, eligibility, and amounts change by program year and service territory, so the right move is to check current offers for your specific address before you buy. We'll help you see what yours qualifies for.
- Section 179 (commercial and rental property). Businesses and rental-property owners can often deduct qualifying HVAC placed in service in an existing commercial building in the same tax year, rather than depreciating it over decades. This is a business deduction, not a consumer credit — a CPA conversation, not something we file for you.
- Manufacturer promotions that rotate through the year.
- HVAC financing to spread the cost over time.
The heat-pump math without the credit
Even before 25C existed, a heat pump usually won on total cost of ownership in Baldwin County. Our mild winters and long cooling seasons play to its strength: it heats and cools on the same refrigerant cycle instead of burning electricity through resistance heat strips all winter, the way a straight-AC-plus-electric-heat setup does.
The credit accelerated the payback. Losing it lengthens payback modestly — but for most Baldwin County homes it doesn't flip the decision. What moves your long-run cost far more than any credit is correct sizing and an AHRI-matched system, not the incentive attached to the purchase. Getting the size right starts with a real load calculation, which we walk through in choosing the right AC size with Manual J.
Why AHRI matching still matters
The heat pumps that used to qualify for 25C — most premium variable-speed units and many mid-tier two-stage units in the right configurations — are the same ones that deliver the efficiency you're paying for. Builder-grade single-stage equipment generally didn't qualify and generally doesn't deliver the same operating economy.
The way to confirm a specific system is the AHRI Certificate of Performance for the matched indoor and outdoor units. The AHRI directory at ahridirectory.org is searchable by reference number and gives the official ratings on the exact combination being installed. Confirm the AHRI reference number on your quote regardless of what credits do or don't apply — it's the single best protection against paying for efficiency you won't actually get. We explain why this matters so much in why installers insist on AHRI-matched components, and the same line between builder-grade and premium equipment shows up in new construction too.
Ready for a heat pump quote?
Air Solutions Heating & Cooling provides Baldwin County heat pump installations with full AHRI matching, Manual J load calculations, and manufacturer warranty registration. Family-run, founded in Daphne, licensed AL#23194.
- Schedule a Quote — free in-home consultation with Manual J load calculation
- Heat Pump services — full overview
- Financing — payment options