The Federal 25C and 25D Credits Expired December 31, 2025.
What that means for homeowners weighing a 2026 heat pump install, the one narrow situation where the expired credit still applies, and what's actually available now — utility rebates, manufacturer promotions, and HVAC financing. Honest current guide. Air Solutions Heating & Cooling, AL#23194.
The short version
The federal 25C Energy Efficient Home Improvement Credit and the 25D Residential Clean Energy Credit both expired December 31, 2025 (Public Law 119-21). A heat pump or geothermal system installed in 2026 does not qualify for either credit. The only remaining use: a system placed in service on or before December 31, 2025 may still be claimed on the 2025 federal return via IRS Form 5695 — a CPA conversation, not something we file for you. For 2026 installs, the real incentive stack is utility rebates (which depend on the utility on your bill), manufacturer promotions, and HVAC financing. None of this is tax advice.
The 25C Credit — What It Covered and When It Ended.
The 25C Energy Efficient Home Improvement Credit was a federal income-tax credit that covered 30% of qualifying residential HVAC costs up to two annual caps: up to $2,000 per year for qualifying high-efficiency heat pumps and up to $1,200 per year combined for central AC, furnaces, boilers, and home-envelope improvements.
The Inflation Reduction Act (2022) extended the credit through 2032. The 2025 federal budget law — Public Law 119-21 — reversed that extension. The credit expired December 31, 2025. Any system placed in service on January 1, 2026 or later does not qualify, regardless of efficiency rating.
Be skeptical of any article, ad, or page that still cites a 2026-eligible federal 25C credit — including earlier versions of this very page. If you see it, the source is out of date.
Pre-Cutoff Installs: Still Claimable on Your 2025 Return.
If your qualifying heat pump was placed in service in your primary residence on or before December 31, 2025, you can still claim the credit on your 2025 federal return using IRS Form 5695 (Residential Energy Credits). This is the only remaining use of the 25C credit. It does not extend to 2026 installations.
To support that claim, keep three items in your tax file:
- Contractor invoice showing the date the equipment was placed in service (placed in service = installation completed, not the date you signed the contract).
- AHRI Certificate of Performance for the matched indoor and outdoor system. Without this, a claim can be denied at audit even when the equipment genuinely qualified.
- Manufacturer's certification that the equipment met the credit requirements.
Our office provides the invoice and AHRI certificate for installs we completed. The filing belongs with your CPA or qualified tax preparer — we do not give tax advice.
The 25D Residential Clean Energy Credit Also Expired.
The 25D credit — which covered 30% of cost with no annual cap for geothermal heat pumps, solar PV, solar water heating, fuel cells, and battery storage — expired on the same date under the same law. A geothermal heat pump placed in service in 2026 or later does not qualify.
The same one-exception rule applies: a qualifying system placed in service on or before December 31, 2025 may be claimed on the 2025 return via Form 5695. Confirm your specific situation with a CPA.
In Baldwin County, geothermal heat pumps were already an uncommon install — the long cooling season and mild winters make air-source heat pumps the dominant economics. Air- source heat pumps qualified under 25C, not 25D, in any case — and that credit expired December 31, 2025.
Real Incentives for 2026 Baldwin County Installs.
The loss of the federal credit doesn't remove every incentive from the picture. Several programs remain:
- Utility rebates: most of Baldwin County is served by Baldwin EMC or Riviera Utilities, not Alabama Power. Baldwin EMC runs a tiered heat pump rebate for members (Manual J, full system replacement, and a Baldwin EMC inspection required); Riviera does not currently list one; Alabama Power's $1,000 rebate covers gas-to-electric heat pump conversions only and ends December 1, 2026. Check the utility on your bill. See our rebates page for full utility-rebate details.
- Manufacturer promotions: equipment makers sometimes run limited-time promotions on specific equipment lines, on their own calendar and independent of the expired federal credits. Ask during your quote whether one applies.
- HVAC financing: affordable monthly payments on qualifying installs. See our financing page for current terms. Financing stacks with utility and manufacturer rebates.
- Commercial + rental property: business HVAC follows different tax rules (such as Section 179 equipment expensing) than the residential 25C/25D credits that expired. Confirm what applies with a CPA. We provide install documentation in the format your CPA needs.
None of this is tax advice. Confirm your specific situation with a qualified CPA or tax preparer.
A Heat Pump Without the Credit Still Makes Sense in Baldwin County.
The 25C credit (expired December 31, 2025) was an acceleration of payback, not the foundation of the argument. Baldwin County's mild winters and long cooling seasons play directly to a heat pump's 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.
Losing the incentive lengthens the payback modestly — for most homes here it does not flip the decision. What moves long-run cost far more than any credit is correct sizing and an AHRI-matched system, which is exactly what we build every quote around. The relevant technical background lives in our heat pump services hub and in the longer guide on the 25C expiration we published after the law changed.
Federal HVAC Tax Credits — Frequently Asked Questions
Did the federal 25C heat pump tax credit really expire?
Yes. The federal Energy Efficient Home Improvement Credit (25C) expired on December 31, 2025. The 2025 federal budget law — Public Law 119-21 — reversed the Inflation Reduction Act's extension-through-2032. A system placed in service on January 1, 2026 or later does not qualify for the 25C credit, regardless of how efficient it is. Any older article or brochure still citing a 2026-eligible 25C credit is out of date. This is general guidance, not tax advice — confirm your specific situation with a CPA.Is there any situation where the expired 25C credit still helps me?
One. If your qualifying heat pump was placed in service in your primary residence on or before December 31, 2025, you can still claim the credit on your 2025 federal return — the return you file in 2026 — using IRS Form 5695. A system installed in 2026 or later does not qualify under any circumstances. We can provide the AHRI certificate and equipment invoice for a pre-cutoff install; the filing itself is a conversation for your CPA.What is the 25D Residential Clean Energy Credit, and did that expire too?
The 25D credit — which covers geothermal heat pumps, solar PV, solar water heating, battery storage, and fuel cells — also expired December 31, 2025 under Public Law 119-21. A geothermal heat pump placed in service in 2026 or later does not qualify. The same one-exception rule applies: a system placed in service on or before December 31, 2025 may still be claimed on the 2025 return via IRS Form 5695. Confirm your situation with a CPA.What paperwork do I need if I had a qualifying install before the cutoff?
Keep three documents in your tax file: (1) the contractor invoice showing the date the equipment was placed in service — placed in service means installation completed, not the contract-sign date; (2) the AHRI Certificate of Performance for the matched indoor and outdoor system; and (3) the manufacturer's certification that the equipment qualified. Without the AHRI certificate, a claim can be denied at audit even if the equipment genuinely qualified. Our office can provide the invoice and AHRI reference for installs we completed. The filing belongs with your CPA.What utility rebates are still available in 2026?
Utility rebates were never tied to 25C, but they depend on which electric utility is on your bill. Most of Baldwin County is served by Baldwin EMC or Riviera Utilities, not Alabama Power. Baldwin EMC runs a tiered heat pump rebate for members who own single-family homes (it requires a Manual J load calculation, full system replacement, and a Baldwin EMC inspection) plus an energy-efficiency loan program. Riviera Utilities does not currently list a heat pump rebate. Alabama Power's $1,000 heat pump rebate applies only to customers switching from a gas furnace to a qualifying heat pump, and Alabama Power says it ends December 1, 2026. See our rebates page for details, and we can help you figure out which programs apply to your address.What about manufacturer rebates?
Equipment manufacturers sometimes run limited-time promotions on specific equipment lines. They are independent of federal credits, and their terms and amounts change often — ask during your quote whether a current promotion applies to the equipment you're considering.Are there any commercial HVAC deductions still in place for 2026?
Commercial and rental-property HVAC follows different tax rules than the residential 25C/25D credits that expired — for example, Section 179 equipment expensing. Which deductions or credits apply, and their current status, is a question for your CPA; several federal energy provisions changed under Public Law 119-21. We provide the install documentation your CPA needs. None of this is tax advice.Does a heat pump still make sense in Baldwin County without the federal credit?
Yes. The case for a heat pump in our climate was never primarily about the 25C credit. Baldwin County's mild winters and long cooling seasons play directly to a heat pump's strength: it heats and cools on the same refrigerant cycle instead of running resistance heat strips all winter. Losing the incentive lengthens the payback only modestly — for most homes here it does not flip the decision. What moves long-run cost far more is correct sizing and an AHRI-matched system. We build every quote around a Manual J load calculation.
See What's Actually Available on Your Install.
In-home Manual J load calculation, equipment options scoped to your home, and a written quote showing current utility rebates, manufacturer promotions, and financing — not a federal credit that no longer exists. No salesperson pressure.
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