2026 HVAC Tax Credits and Rebates: Complete Guide to Saving Thousands
You just spent $8,000 on a new high efficiency furnace. The installation went perfectly. Your house is warm. Everything's great.
Except you didn't claim the $2,000 federal tax credit you qualified for. You missed the $800 utility rebate. And you had no idea your state offers an additional $500 incentive program.
That's $3,300 you left on the table. Most homeowners do exactly this. They buy qualifying HVAC systems and never claim the money waiting for them.
This guide shows you exactly which HVAC systems qualify for 2026 incentives, how much money is actually available, step by step instructions for claiming everything, and deadlines you can't afford to miss.
No confusing tax code language. No vague "you might qualify" nonsense. Just clear information about putting thousands back in your pocket.
Federal Tax Credits: Up to $2,000 for Qualifying Systems
The Inflation Reduction Act provides federal tax credits through 2032. This isn't a limited time promotion. You have years to plan upgrades and claim benefits.
The Energy Efficient Home Improvement Credit (25C) covers HVAC systems that meet specific efficiency requirements. You can claim up to $2,000 for qualifying equipment.
What Qualifies for Federal HVAC Tax Credits
Heat pumps get the biggest credit at $2,000. Requirements:
Air source heat pumps: minimum 16 SEER2 and 9.5 HSPF2
Geothermal heat pumps: meets Energy Star requirements
Ductless mini split heat pumps: same efficiency as air source
Central air conditioners qualify for up to $600. Requirements:
Minimum 16 SEER2 and 13 EER2
Must be Energy Star certified
Split systems and package units both qualify
Gas furnaces and boilers qualify for up to $600. Requirements:
Natural gas furnaces: minimum 97% AFUE
Natural gas boilers: minimum 95% AFUE
Oil furnaces: minimum 90% AFUE
Notice the efficiency thresholds. Not every new HVAC system qualifies. Standard efficiency equipment doesn't meet these requirements. You need high efficiency models to claim credits.
Understanding which HVAC systems offer the best value helps you choose equipment that qualifies without overpaying for unnecessary features.
Income Limits and Eligibility
Good news: there are NO income limits for the 25C tax credit. Everyone qualifies regardless of income level.
You can claim the credit for your primary residence only. Second homes and rental properties don't qualify under this program.
The $2,000 heat pump credit and $600 limits for other equipment are annual caps. You could install a heat pump in 2026, claim $2,000, then install another heat pump in 2027 and claim another $2,000.
State and Utility Rebates: The Money Nobody Tells You About
Federal credits are just the beginning. State programs and utility company rebates add thousands more in savings.
Illinois HVAC Rebates (Rockford Area)
ComEd and Nicor Gas offer rebates for efficient HVAC equipment:
Heat pump rebates:
$500 to $1,000 for qualifying air source heat pumps
Requirements vary by efficiency rating
Smart thermostat included: add $50 to $100
Furnace rebates:
$400 to $600 for 95%+ AFUE gas furnaces
Must be installed by qualified contractor
Some programs require EnergyStar certification
Central AC rebates:
$300 to $500 for 16 SEER or higher
Early retirement of old units: additional $100 to $200
Seasonal promotions increase rebates
Check with your specific utility provider. Programs change regularly and some offer higher rebates during off-peak seasons.
Many homeowners explore heat pump options specifically because combined incentives make them cost-competitive with gas furnaces.
How to Find Your Local Rebates
Visit DSIRE (Database of State Incentives for Renewables & Efficiency) and enter your ZIP code. This database tracks every available incentive program by location.
Call your utility company directly and ask about current HVAC rebate programs. Representatives can tell you exactly what's available and help with applications.
Ask HVAC contractors about available rebates. Good contractors track these programs and help customers maximize savings. If a contractor doesn't mention rebates, that's a red flag.
How to Actually Claim Your HVAC Tax Credit
The process is simpler than most people think. You don't need an accountant or tax specialist.
Step-by-Step Process
Before installation:
Verify your system qualifies by checking manufacturer specifications
Confirm the HVAC company you're using can provide required documentation
Save all quotes and contracts showing equipment model numbers
During installation:
Get the Manufacturer's Certification Statement from your contractor
Request itemized invoices showing equipment costs separately from labor
Take photos of equipment data plates showing model and serial numbers
Keep all permits and inspection records
When filing taxes:
Complete IRS Form 5695 (Residential Energy Credits)
Enter qualifying equipment costs in Part II
Calculate your credit (up to the maximum allowed)
Transfer the credit amount to your Form 1040
You don't need to submit documentation with your return. Keep everything in case of audit. The IRS requires you to maintain records for at least three years.
According to Energy Star guidelines, the Manufacturer's Certification Statement is critical. Without it, you can't claim the credit even if your equipment qualifies.
Common Filing Mistakes
Don't claim labor costs. Only equipment and direct installation costs qualify. Labor for installation doesn't count toward the credit.
Don't exceed annual limits. You can't claim $2,000 for a heat pump and another $2,000 for something else in the same year. The $2,000 is the total maximum per year for heat pumps.
Don't claim the same improvement twice. If you claimed a credit for your furnace in 2024, you can't claim it again in 2026 unless you install new qualifying equipment.
Don't forget state tax forms. Some states have separate energy efficiency tax credits requiring different forms. Check your state requirements.
Combining Incentives for Maximum Savings
Stack federal credits with state and utility rebates for the biggest savings. These programs work together, not against each other.
Real Example: Heat Pump Installation
Total equipment and installation cost: $10,000
Available incentives:
Federal tax credit: $2,000
ComEd utility rebate: $800
Illinois state program: $500
Contractor promotional discount: $200
Total incentives: $3,500
Your net cost: $6,500 for a $10,000 heat pump system. That's 35% savings just from available programs.
Most incentives don't reduce your tax credit basis. You claim the federal credit on the full equipment cost even after receiving utility rebates. Always verify current rules, but generally these programs complement each other.
Timing Your HVAC Installation
Install before the heating or cooling season for better pricing. Contractors charge premium rates during peak demand.
Plan installations in spring (March to May) for AC systems or fall (September to November) for heating systems. You'll get better pricing and easier scheduling.
However, don't delay qualifying installations just to time them perfectly. Tax credits and rebates are available year-round. The savings from incentives outweigh minor seasonal price differences.
If you're dealing with emergency heating failures or AC problems in summer, don't wait for ideal timing. Get the system replaced and claim incentives whenever installation happens.
Special Programs for Income-Qualified Households
Low and moderate income households qualify for enhanced rebates. These programs provide significantly more assistance.
Home Efficiency Rebates Program
Coming in 2024-2025 (check current availability), this program offers:
Up to $8,000 for heat pump installation
Up to $4,000 for electrical panel upgrades needed for heat pumps
Up to $1,600 for insulation improvements
Additional funding for weatherization
Income limits apply. Generally, households earning less than 80% of area median income qualify for full rebates. Those earning 80% to 150% of median income get partial rebates.
Weatherization Assistance Program
Low income households may qualify for free HVAC upgrades through the Weatherization Assistance Program. This federally funded program provides complete heating system replacement at no cost to qualifying families.
Contact your local Community Action Agency to apply. Requirements include income verification and home ownership or landlord permission.
Geothermal Systems: The Biggest Tax Credits
Geothermal heat pumps qualify for a 30% tax credit with no dollar limit through 2032. This is significantly better than the $2,000 cap for air source heat pumps.
How Geothermal Credits Work
You can claim 30% of total installation costs including:
Heat pump equipment
Ground loop installation
Connection to home
All labor and materials
Example: $25,000 geothermal installation generates a $7,500 tax credit. This is a true credit reducing your tax bill dollar for dollar, not a deduction.
The credit applies to both new construction and retrofits. You can claim it for existing homes, new homes, or even vacation homes (geothermal credits apply to second homes unlike the 25C credit).
Geothermal systems cost significantly more than air source heat pumps but the 30% credit plus utility rebates make them financially competitive. Some utility companies offer additional $1,000 to $2,000 rebates for geothermal installations.
What Doesn't Qualify (And Why It Matters)
Not every HVAC purchase gets you tax credits. Understanding exclusions prevents disappointment.
Systems That Don't Qualify
Portable air conditioners and window units: Only central AC systems qualify for federal credits.
Standard efficiency equipment: Basic 80% furnaces and 14 SEER air conditioners don't meet minimum efficiency requirements.
Repairs and maintenance: Replacing parts on existing systems doesn't qualify. You need complete system replacement.
Used or refurbished equipment: Only new HVAC systems qualify for tax credits.
Improperly installed systems: If installation doesn't meet manufacturer specifications or local codes, credits may be denied in audits.
This is why understanding when to repair vs replace matters. Sometimes replacing earlier than absolutely necessary makes sense when tax credits cover 20% to 30% of costs.
Documentation You Must Keep
Manufacturer's Certification Statement showing the equipment meets efficiency requirements. Itemized invoice with equipment costs broken out separately. Proof of payment (cancelled checks, credit card statements). Installation permits and final inspections. Photos of equipment serial numbers and model information.
Keep these records for seven years minimum. The IRS can audit tax returns up to six years after filing in some circumstances.
Deadlines and Expiration Dates
Most 2026 HVAC incentives have clear deadlines. Missing them costs you money.
Federal Tax Credit Timeline
The Energy Efficient Home Improvement Credit (25C) runs through December 31, 2032. You have several years to claim benefits.
However, equipment must be "placed in service" during the tax year you claim. This means installed and operational. Paying a deposit in December 2025 but installing in January 2026 means claiming on your 2026 taxes, not 2025.
Utility Rebate Deadlines
Utility company rebates often have fiscal year limits. Many reset January 1st. Some run out of funding mid-year when budgets are exhausted.
Apply for utility rebates immediately after installation. Don't wait months. Funding can disappear unexpectedly when programs hit participation caps.
Most require applications within 90 days of installation. Check specific program requirements before assuming you have unlimited time.
Work with qualified HVAC installation companies familiar with rebate programs and deadlines to ensure you don't miss opportunities.
Frequently Asked Questions
How much is the HVAC tax credit for 2026?
The federal HVAC tax credit for 2026 is up to $2,000 for heat pumps and $600 for qualifying furnaces or air conditioners. Heat pumps must meet 16 SEER2 and 9.5 HSPF2 minimums. Gas furnaces need 97% AFUE to qualify. Combined with state and utility rebates, total savings can reach $3,500 to $4,500.
Do I get a tax credit for replacing my furnace?
Yes, you get a federal tax credit of up to $600 for replacing your furnace if it meets efficiency requirements. The new furnace must be at least 97% AFUE for natural gas or 90% AFUE for oil. Standard 80% efficiency furnaces don't qualify. You'll also need the Manufacturer's Certification Statement when filing taxes.
Can I claim both federal and state HVAC rebates?
Yes, you can claim federal tax credits, state incentives, and utility rebates simultaneously. These programs stack together. For example, a heat pump installation can qualify for a $2,000 federal credit plus $800 utility rebate plus $500 state program, totaling $3,300 in combined savings. Federal credits don't reduce state or utility rebate amounts.
What qualifies for the $2,000 heat pump tax credit?
Heat pumps qualify for the $2,000 federal tax credit when they meet minimum 16 SEER2 and 9.5 HSPF2 efficiency ratings. This includes air source heat pumps, ductless mini splits, and geothermal systems. The equipment must be Energy Star certified and installed in your primary residence. Geothermal systems actually qualify for a separate 30% credit with no dollar limit.
How do I claim my HVAC tax credit?
Claim your HVAC tax credit by completing IRS Form 5695 when filing your taxes. Enter qualifying equipment costs in Part II, calculate your credit amount, and transfer it to Form 1040. Keep your Manufacturer's Certification Statement, itemized invoice, and installation receipts for your records. You don't submit documentation with your return but must keep it for potential audits.
Is there an income limit for HVAC tax credits?
No, there is no income limit for the 2026 federal HVAC tax credit (25C credit). Anyone can claim it regardless of income level. However, income-qualified households earning less than 80% of area median income may qualify for additional enhanced rebates up to $8,000 through the Home Efficiency Rebates Program.
Do air conditioners qualify for tax credits in 2026?
Yes, central air conditioners qualify for up to $600 federal tax credit in 2026. The AC must meet minimum 16 SEER2 and 13 EER2 efficiency ratings and be Energy Star certified. Window units and portable air conditioners don't qualify. Only central AC systems installed in your primary residence are eligible.
Ready to claim thousands in HVAC incentives? Work with experienced HVAC professionals who understand current tax credit requirements and can provide all necessary documentation. Don't leave money on the table when replacing your heating and cooling systems.
Looking for more HVAC guidance? Check out expert furnace repair insights or explore financing options that work with available rebates to make new systems affordable.