Disclaimer: The federal energy tax credits described in this article were not administered or provided by Radiant Plumbing & Air Conditioning. This information is for general awareness only and does not constitute tax advice. Please consult a qualified tax professional for guidance based on your individual situation.
Update, 2026: The federal HVAC tax credits this article covered have ended. The Section 25C credit is not available for equipment placed in service after December 31, 2025, and the Section 25D credit is not available for expenditures made after that date. No replacement credit has taken their place. Here is what the credits were, why they ended early, and what still helps with the cost of a new system.
What the HVAC Tax Credits Were
The Inflation Reduction Act of 2022 expanded two federal credits that homeowners used for heating and cooling upgrades.
Section 25C: Energy Efficient Home Improvement Credit
- 30% of qualifying costs, capped at $1,200 a year for most upgrades
- A separate $2,000 annual cap for qualifying heat pumps and heat pump water heaters
- Covered high-efficiency central air conditioners, furnaces, heat pumps, insulation and air sealing that met the program’s efficiency tiers
Section 25D: Residential Clean Energy Credit
- 30% of the cost of solar panels, geothermal heat pumps and battery storage, with no annual cap
Why the Credits Ended Early
Both credits were originally scheduled to run through 2032. The One Big Beautiful Bill Act, signed on July 4, 2025, moved the end date up to December 31, 2025. For 25C, what counts is when the equipment was placed in service. For 25D, it is when the expenditure was made, and the IRS treats an installation finished after December 31, 2025 as an expenditure made after that date.
If Your System Was Installed in 2025
Qualifying equipment placed in service during 2025 can still be claimed on your 2025 federal return, using IRS Form 5695. Keep the invoice and the manufacturer’s certification for the equipment, and ask your tax professional whether you need to amend a return you have already filed.
Lowering the Cost of a New System Now
Without the federal credit, the case for a high-efficiency system rests on what it saves, and in Central and South Texas that is a lot. An air conditioner here runs for most of the year, so a more efficient unit pays back faster than it would in a milder climate. A few other things still help:
- Utility rebates. Austin Energy and CPS Energy have both run rebate programs for efficient heating and cooling equipment. Check your utility’s current terms before you buy, since amounts and eligibility change.
- Financing. Radiant offers financing on new systems, and current promotions are listed on our special offers page.
- Right-sizing. A system sized to your house rather than to the old unit’s nameplate costs less to run and lasts longer.
- Heat pumps. With mild winters, a heat pump can replace both an air conditioner and a furnace. See heat pumps in Austin or heat pumps in San Antonio.
Talk to Radiant About a Replacement
If your system is over 10 years old or struggling through the summer, our licensed technicians can tell you whether repair or replacement makes more sense, and what an efficient system would save you. Radiant has served Austin and San Antonio homes since 1999, with upfront pricing approved before any work starts and no surprise fees. Learn more about AC installation in Austin or AC installation in San Antonio.
