As we gear up for Thanksgiving and start thinking about all the things we’re grateful for this year, here’s something that might not be on your list but should be: federal tax credits for heating and cooling upgrades!!
And we hate to be the bearer of not-so-great news, but if you’ve been putting off replacing that aging furnace or inefficient AC system, 2025 is your last chance to take advantage of some pretty sweet federal incentives.
The IRS confirmed this past August that several energy efficiency tax credits are wrapping up at the end of this year. That means if you want to save up to $2,000 on a new heat pump or $600 on a high-efficiency furnace or AC, you need to have everything installed and running by December 31, 2025. Not ordered. Not scheduled. Actually installed and operational.
What you can still save on in 2025
Let’s break down what’s still on the table for Charlotte area homeowners looking to upgrade their comfort systems this year. The good news is that pretty much every major heating and cooling upgrade you might be considering still qualifies for credits, as long as you act before the calendar flips to 2026.
If you’re thinking about a heat pump (and honestly, with our Charlotte winters getting more unpredictable, who isn’t?), you can get 30% of the cost covered, up to $2,000. That’s real money back in your pocket come tax time. Heat pumps are fantastic for our climate since they handle both heating and cooling, and the newer models work great even when temperatures dip into the 20s.
For those sticking with traditional systems, high-efficiency gas furnaces and central air conditioners each qualify for 30% credits up to $600. And if your water heater is on its last legs, you can get the same $600 credit for a high-efficiency gas or oil model, or go big with a heat pump water heater and snag that full $2,000 credit.
How the whole thing actually works
Here’s where we get into the nitty-gritty, but don’t worry, we’ll keep it simple. Think of these tax credits like a rebate you get when you file your taxes. You pay for your new system upfront, then when tax season rolls around in 2026, you fill out Form 5695 and reduce what you owe Uncle Sam by the credit amount.
The key phrase the IRS uses is “placed in service,” which is just fancy talk for “installed and working.” So if you order a system on December 30th but it doesn’t get installed until January 2026, sorry, no credit for you. This is why we’re telling folks now, in November, to get moving if they want to take advantage of these savings.
There’s also something new for 2025 called a manufacturer PIN. Basically, qualifying equipment gets a special number from the manufacturer that proves it meets the efficiency standards. Your contractor should provide this to you, and you’ll need it for your tax filing. It’s like a receipt that proves your new system is efficient enough to qualify.
The annual caps you need to know
The IRS sets limits on how much you can claim each year, and it’s actually pretty generous. You can claim up to $3,200 total for the year, which breaks down into $2,000 for heat pumps or heat pump water heaters, plus another $1,200 for other improvements like furnaces, AC units, or insulation.
One important thing to remember: these credits are non-refundable. That means if your credit is bigger than what you owe in taxes, you can’t carry the extra forward to next year. So if you owe $1,500 in taxes and qualify for a $2,000 credit, you’ll zero out your tax bill but lose that extra $500. Still a pretty good deal though!
Your timeline for taking action
With Thanksgiving around the corner and the holiday rush about to kick into high gear, scheduling is going to get tight. Most heating and cooling companies (including us here at Harmony) are already booking into December for installations. Factor in potential equipment availability issues and the fact that everyone else is probably thinking the same thing you are right now, and you can see why waiting isn’t a great strategy.
Here’s what you need to do if you want to capture these credits:
First, figure out what needs replacing. That furnace that’s been making weird noises? The AC that barely kept up last summer? Now’s the time. Second, make sure whatever you’re considering meets the efficiency requirements for the credits. Not every system qualifies, so you want equipment that’s specifically rated for these federal programs.
Next, get your installation scheduled ASAP. Remember, it has to be installed and running by December 31st. No exceptions. When your system is installed, make sure you get all the documentation from your contractor, including that manufacturer PIN we mentioned, model numbers, and efficiency ratings. You’ll need all of this when you file your taxes.
What happens after 2025?
Come January 1, 2026, these particular tax credits for heating and cooling equipment disappear. The IRS has been crystal clear about this. While some other energy credits might continue or new programs might pop up down the road, there’s no guarantee. State and utility rebates might still be available, but those federal credits that can save you thousands? They’re done.
This is one of those situations where procrastinating literally costs you money. If you’ve been thinking “maybe next year” for a while now, well, this is the last “next year” where you’ll get help from the federal government to make that upgrade more affordable.
Time to make your move
Look, we get it. Replacing a heating or cooling system isn’t exactly the most exciting way to spend your money. It’s not like buying a new car or taking a vacation. But when that system keeps your family comfortable through Charlotte’s humid summers and those surprisingly chilly winter nights, and when you can save serious money on the purchase thanks to these expiring tax credits, it starts to look like a pretty smart investment.
If you’re sitting there right now thinking about that system that’s been limping along, or if your energy bills have been creeping up year after year, this is your sign to take action. These credits are literally free money from the government to help make your home more efficient and comfortable.
We’re thankful for a lot of things this November, including the opportunity to help our Charlotte neighbors stay comfortable year-round. And we’d be especially thankful to help you take advantage of these credits before they’re gone for good. Whether you have questions about what systems qualify, want to know more about the installation timeline, or just need someone to take a look at your current setup, we’re here to help.
Don’t let December 31st sneak up on you. Schedule your service now or reach out with any questions you might have about making the most of these expiring tax credits. Your future self (and your wallet) will thank you.