Important Update: The Federal HVAC Tax Credit Expired December 31, 2025

Now that we’re in 2026, the Federal Energy Efficient Home Improvement Credit (Section 25C) from the Inflation Reduction Act has officially ended. Any homeowners who installed a qualifying HVAC system in 2025 can still claim that credit on this year’s tax return (filing in early 2026). Those federal rebates could fetch you up to $3,200 total, including $2,000 for heat pumps and $600 for air conditioners or furnaces.

How Can I Still Save on a New System?

If you missed the deadline, don’t worry. We still offer some of the best specials in the industry at Watkins Heating & Cooling, including Trane manufacturer rebates up to $1,500. And our team is focused on helping each homeowner get the best possible discounts for their home and budget. Plus, the latest high-efficiency systems pay for themselves over time with lower energy bills, fewer breakdowns, and a boost in your home value. You can learn about our available discounts and specials here.

Call our Watkins team at 937-748-0220 to discuss your options today or book a free estimate online.

Why Did the HVAC Tax Credit End in 2026?

In July of 2025, the federal government passed the One Big Beautiful Bill (OBBBA). With this passage, they announced that the Energy Efficient Home Improvement Credit (Section 25C) would officially end on December 31, 2025.

Experts do not expect the HVAC tax rebate to be brought back in the near future. You can learn more about what was in the tax bill change here.

What Were the HVAC Tax Credits Before They Ended?

Before the federal HVAC tax credit was eliminated, it offered rebates on air conditioners, heat pumps, furnaces, and water heaters to homeowners throughout the United States. Ohio also previously offered additional utility rebates in the Dayton and Cincinnati areas from CenterPoint Energy. However, that rebate program was discontinued as well.

The Federal Energy Efficient Home Improvement Credit was part of the United States government’s Inflation Reduction Act, which aimed to encourage energy-efficient home improvements. These credits were available for a wide range of energy-efficient upgrades, including air source heat pumps, central air conditioners, and gas furnaces. The federal tax credits were capped at $3,200 per year. For more detailed information on the U.S. government’s federal tax credits and ENERGY STAR program, visit the ENERGY STAR website.

In order to qualify, your HVAC system was required to be ENERGY STAR certified. This included meeting SEER2 (Seasonal Energy Efficiency Ratio) and EER2 (Energy Efficiency Ratio) requirements for air conditioners. Heat pumps were also required to meet HSPF2 (Heating Seasonal Performance Factor) requirements.

Furnaces were required to meet AFUE (Annual Fuel Utilization Efficiency) standards to qualify. While water heaters were required to meet UEF (Uniform Energy Factor) or EF (Energy Factor) ratings, depending on the type of system.

Here’s a closer look at the specific ratings your HVAC system needed in order to be eligible for tax rebates:

1. Central Air Conditioners

• Tax Credit Amount: Up to $600. This rebate covered 30% of your system’s total cost, but was capped at $600.
• Requirements: To qualify for the 2025 federal tax credit, central air conditioner systems required a rating of at least 16 SEER2 and 12 EER2. They also needed to be ENERGY STAR certified. This SEER2 minimum applied to split systems, while packaged systems automatically qualified as long as they were ENERGY STAR certified.
• Benefits: Central air conditioning systems are essential for maintaining comfort during Ohio’s hot summers. This tax credit helped offset the cost of upgrading to a new, energy-efficient air conditioning system.

2. Gas Furnaces

• Tax Credit Amount: Up to $600. This rebate covered 30% of a system’s total cost, but was capped at $600.
• Requirements: To qualify for the 2025 federal tax credit, gas furnace systems required a rating of at least 97%AFUE. They also needed to be ENERGY STAR certified.
• Benefits: High-efficiency gas furnaces reduce energy consumption while providing cozy warmth. The available tax rebates aided the investment for Ohio homeowners looking to stay warm and save money during cold winters.

3. Air Source Heat Pumps

• Tax Credit Amount: Up to $2,000. This rebate covered 30% of your system’s total cost, but was capped at $2,000.
• Requirements: To qualify for the 2025 federal tax credit, ducted heat pump systems required a rating of at least 15.2 SEER2, 8.1 HSPF2, and 10 EER2. Ductless (mini-split) heat pumps had a slightly higher requirement. Ductless heat pump systems required a rating of at least 15.2 SEER2 and 8.5 HSPF2 for the tax credit. Both types of air source heat pumps also needed to be ENERGY STAR certified
• Benefits: Cold climate and mini-split heat pumps are highly efficient and provide yearlong comfort through both heating and cooling for your home. With the heat pump tax credit, homeowners significantly reduced the upfront costs of installing a new system. If you’re trying to decide which cooling system to buy, check out our article on Heat Pump vs. Air Conditioners.

4. Geothermal Heat Pumps

• Tax Credit Amount: 30% of an installed job. This HVAC federal tax credit had no cap, so if you spent $20k on your geothermal heat pump system job, you would’ve been eligible for a $6,000 rebate. This included equipment, labor, related ductwork, and installation of the ground-source water loop.
• Requirements: All geothermal heat pumps that were ENERGY STAR certified instantly qualified for the 2025 federal tax credit.
• Benefits: Geothermal heat pumps are extremely energy efficient and provide reliable comfort year-round. Plus, these systems last a long time, making them a smart investment. With the geothermal tax credit, homeowners could save a lot on installation. For more details about these systems, check out our Geothermal Heat Pump page.

5. Water Heaters

• Tax Credit Amount: Up to $600. This rebate covered 30% of your system’s total cost, with $600 being the maximum amount.
• Requirements: To qualify for the 2025 federal tax credit, tankless water heaters required a rating of at least .95 UEF. Requirements for water heaters with tanks were a bit different. Gas storage water heaters required a rating of at least .81 UEF for tanks less than 55 gallons, and at least .86 UEF for tanks of 55 gallons or more. Both types of water heaters needed to be ENERGY STAR certified.
• Benefits: With the water heater tax credit, homeowners could significantly reduce the upfront costs of installing a new unit. If you’re trying to decide which one to buy, check out our water heater pricing page here. We’re excited to offer a $500 exclusive rebate when you get a Navien water heater with a new HVAC system.

CenterPoint Energy Utility Rebates for the Dayton, Ohio Area

* Important Update *

* As of Friday, November 1st, 2024, CenterPoint Energy has discontinued the program below. *

In addition to the federal tax credits above, homeowners in Dayton, Ohio and northern Cincinnati, Ohio could previously take advantage of utility rebates offered by CenterPoint Energy.

As we’ll discuss in the next section, electric energy rebates have been discontinued in Ohio, but some gas HVAC rebates are still available. If your home uses CenterPoint Energy’s natural gas as the primary heating source, you may qualify for the rebates listed below.

Furnaces:

• $400 rebate for Natural Gas Furnace with 97% AFUE or higher
• $150 rebate for Natural Gas Furnaces with 95% AFUE – 96.99% AFUE

Gas Boilers:

• $500 rebate for Gas Boilers with 95% AFUE or higher; Input capacity  must be less than 300 MBTUH

Water Heaters:

• $250 rebate for Natural Gas Tankless Water Heater with a .90 Energy Factor (EF) or higher
• $100 rebate for Natural Gas Tank Storage Water Heater with a .67 Energy Factor (EF) or higher

Thermostats:

• $50 rebate for “Smart” Wi-Fi enabled thermostat with presence-sensing or geo-fencing capabilities
• $30 rebate for “Basic” Wi-Fi enabled thermostat with Wi-Fi capability for programming and adjusting remotely.

You can see CenterPoint’s specific product eligibility, requirements, and disclaimers here.

AES and Duke Energy Utility Rebates for Dayton and Cincinnati, Ohio

Homeowners in Dayton, Ohio used to have access to utility rebates offered by AES (formerly DP&L), while those in Cincinnati, Ohio could benefit from the Duke Energy Smart $aver® Program.

However, as of 2020, Ohio House Bill 6 has caused AES and Duke Energy to discontinue their energy efficiency incentive programs. This means these companies can no longer offer rebates for energy-efficient HVAC upgrades in Ohio.

How to Claim Your HVAC Tax Credits from 2025

Any homeowners who installed a qualifying HVAC system in 2025 can still claim that credit on this year’s tax return (filing in early 2026). Claiming your HVAC tax credits is straightforward but requires careful attention to detail. Here is a step-by-step guide on how to get your rebate.

1. Verify Eligibility: Ensure your new HVAC system meets the energy efficiency requirements specified by the IRS. Your HVAC contractor should provide the necessary documentation, including the reference number for your AHRI certificate of performance. Always make sure to check if your system has the qualified energy efficient improvements before you purchase it. In the next section, we’ll cover how some contractors may mislead you by skipping this step.
2. File with Your Tax Return: When filing your taxes, you will need to complete IRS Form 5695, “Residential Energy Credits,” to claim the tax credit. Remember to keep all documentation from the purchase of your system, including the invoice from your HVAC contractor and the AHRI number, in case of an audit.
3. Consult a Tax Professional: To get personalized advice and ensure you’re maximizing your savings, consult a tax professional familiar with energy-efficient home improvements.

Why Energy Efficiency Matters

Though homeowners can no longer take advantage of federal tax credits, buying a new energy-efficient system still provides big long-term savings. Reducing energy consumption, lowering utility bills, and preventing breakdowns are just some of the perks. Whether you’re considering air source heat pumps, central air conditioners, or gas furnaces, Watkins has financial incentives to help offset installation costs, and make it an even smarter investment.

Watkins Heating & Cooling are proud to offer some exclusive rebates and special offers up to $1,500 through our partnerships with manufacturers. Check out our special Watkins deals and rebates here.

Our team at Watkins Heating & Cooling is always here to help you navigate the buying process and find the best solutions and deals for your home.