Interested in lowering your energy costs, reducing your carbon footprint, and getting a tax credit in the process? If so, you’re in luck! With the Inflation Reduction Act (IRA), you could be eligible for a substantial tax credit when you make energy-efficient home improvements, like upgrading your current heating and cooling system.
Want to know how you could qualify for the 25C Tax Credit? Use our helpful guide below and reach out to our team of experienced, friendly technicians for more information on HVAC upgrades!
✅ What Qualifies for the 25C Tax Credit?
Through the Inflation Reduction Act (IRA), homeowners can receive:
- 30% of project costs back as a federal credit
- Up to $2,000 for qualifying heat pumps, heat pump water heaters, or biomass stoves/boilers
- Up to $1,200 combined yearly for other upgrades like high-efficiency central AC, furnaces, boilers, insulation, windows, and doors
To qualify:
- The work must be installed by a licensed contractor
- The equipment must meet federal energy-efficiency standards
- Starting with 2025 returns, you must include the manufacturer’s Qualified *Manufacturer Identification Number (QMID
💡 25C Tax Credit at a Glance
- Part of the 2022 Inflation Reduction Act
- Runs Jan 1, 2023 – Dec 31, 2025
- Credit covers 30% of qualifying costs
- Max annual credit: $3,200
- Can be paired with local rebates (like PSEG-Long Island) for even bigger savings
⚠️ Note: Cool Power LLC does not provide tax advice. Always confirm eligibility and filing requirements with a qualified tax professional.
The installation of your qualifying system must be completed by December 31, 2025. Otherwise it will not be able to be claimed on your taxes.
HVAC Upgrades under 25C Tax Credit
Heating and cooling systems can account for a significant portion of a home’s energy consumption. By upgrading your HVAC system, you can take advantage of federal tax credits and improve your home’s overall indoor comfort.
Depending on the type of energy-efficient upgrade you select, certain requirements will need to be met in order to obtain the potential tax credit. See a breakdown below on some common HVAC upgrades that Cool Power LLC provides.
Air Source Heat Pumps
Air source heat pumps are a cost-effective HVAC upgrade due to their cooling and heating functions.
Because heat pumps transfer hot or cool air instead of mainly generating it, these systems provide energy-efficient indoor comfort.
- Requirements: Must meet or exceed CEE (Consortium for Energy Efficiency) highest tier (excluding advanced tier) and efficiency standards (SEER2, EER2, HSPF2). /li>
- Potential credit: 30% of installation costs, up to $2,000.
Ductless Mini-Split Systems
Ductless mini-split systems are a flexible and energy-efficient way to heat and cool individual areas without the need for ductwork.
These systems are ideal for additions, older homes, or areas where installing traditional ducted systems isn’t practical.
- Requirements: Must meet or exceed energy efficiency standards and be listed under the CEE highest efficiency tier (excluding advanced tier).
- Potential credit: 30% of the installation cost, up to $2,000.
Central Air Conditioners
Most homeowners are familiar with central air conditioning systems for indoor comfort.
Upgrading your central AC system to a newer model can provide several key benefits, including improved comfort and reduced cooling costs.
- Requirements: Must meet the CEE highest efficiency tier for your region, not just a SEER2 rating. SEER2 ≥ 16 and EER2 ≥ 12 are good baselines but may vary by region.
- Potential credit: 30% of the project cost, up to $600.
Gas or Oil Furnace
When you choose to upgrade your gas or oil furnace, you’ll enjoy more consistent heating and find that the increased efficiency of the furnace results in lower energy usage.
- Requirements: Gas furnaces must be ENERGY STAR certified, which typically requires an AFUE of ≥ 97%. For oil furnaces, eligibility may vary and depends on the use of certain approved fuels.
- Potential credit: 30% of the project cost, up to $600.
How to Claim Your 25C Tax Credits
Now that you know what HVAC upgrades could qualify you for a potential federal tax credit, you likely want to know some next steps. Cool Power LLC can provide you with general information on how to get started.
Follow These Steps for Qualifying HVAC Upgrades
It’s important to save all receipts, contractor invoices, and manufacturing certifications for any qualifying upgrades to your HVAC system. Using the Residential Energy Credits form (Form 5695), file your federal tax return, keeping in mind that the annual credit cap is $3,200. Remember: Tax codes can be complex.
If you’re looking to obtain tax credits for specific qualifications, it’s important to rely on a licensed tax professional.
- Keep your documentation
- Complete IRS form 5695
- Consult a tax professional
- Submit your annual tax return
HVAC Upgrades Made Easy
At Cool Power LLC, we’re the experts to rely on for all things HVAC. That means, when you want an upgrade to your heating or cooling system, we can provide you with a perfectly sized furnace, AC, mini-split, heat pump, and more.
If your HVAC is past its prime and ready to be replaced, we can help. We’ll evaluate your home’s energy requirements and provide you with the perfect upgrade. Our NATE-certified technicians can expertly install any make or model HVAC system you’re interested in.
Once the upgrade is complete, we’ll still be available to you for ongoing maintenance support or assistance with any questions or concerns you have. It’s our mission to keep homes on Long Island and throughout Nassau and Suffolk counties comfortable year-round.
Interested in learning more? Contact us today for further information about obtaining federal tax credits for home energy upgrades.
Disclaimer: This content is provided for general informational purposes and may not reflect the most current tax guidelines. For detailed eligibility requirements, credit limits, and filing instructions, please refer to IRS.gov or consult with a licensed tax professional.
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