Please note that information is still forthcoming and evolving. There are several unknowns at the state level, and changes are inevitable.
Last updated: September 2026.
Overview
What is the Inflation Reduction Act (IRA)?
The U.S. Government passed the Inflation Reduction Act (IRA) in 2022 to help reduce inflation, decrease carbon emissions, and more. It included several tax credits and rebates for installing ENERGY STAR certified home heating and cooling products.
What is the difference between IRA rebates and tax credit offerings?
There are two rebate programs available. Rebates are administered at the state level and favor lower-income households. Federally funded rebates cannot be combined and are intended for immediate, point-of-sale benefit.
There were originally four tax credits available, though two of the residential ones (25C and 25D) have since ended, as explained below. Tax credits are federal income tax credits available to anyone with taxable income. Tax credits can be combined, and rebates can be filed for the following calendar/tax year.
Tax Credits
What happened to the 25C and 25D tax credits?
Congress passed the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, which ended these credits earlier than originally scheduled. The 25C credit (for furnaces, air conditioners, and heat pumps) and the 25D credit (for heat pumps and other clean energy property) both ended for equipment placed in service after December 31, 2025. They had originally been scheduled to run through 2032, phasing down through 2034. There is no exception for equipment purchased before the bill was signed if it wasn’t installed by the end of 2025.
Can homeowners still claim 25C or 25D for a 2025 installation?
Yes. If a qualifying system was installed and placed in service on or before December 31, 2025, homeowners can still claim the credit on that year’s tax return using IRS Form 5695, even if they file in 2026 or later. Installations placed in service in 2026 or later no longer qualify. Please consult a tax professional to confirm eligibility and documentation.
What did the 25C and 25D credits used to provide?
25C (Nonbusiness Energy Property Credit) provided a tax credit equal to 30% of installation costs for qualified products, up to $600 for air conditioners and furnaces and up to $2,000 for heat pumps, with a combined annual cap of $3,200.
25D (Residential Energy Efficient Property) provided a tax credit equal to 30% of installation costs for ENERGY STAR heat pumps and similar clean energy property.
What about the 45L and 179D tax credits?
45L (New Energy Efficient Home Credit, for builders) now ends for homes acquired after June 30, 2026. It had provided $2,500 for single-family homes and $500 for multi-family units meeting ENERGY STAR 3.1 requirements, increasing to $5,000 for single-family and $1,000 to $2,500 for multi-family homes meeting Zero Energy Ready requirements.
179D (Commercial Buildings Energy-Efficiency Tax Deduction, up to $14,000) now ends for construction beginning after June 30, 2026.
Rebate Programs
Are the IRA rebate programs also gone?
No. The two rebate programs are funded separately from the tax credits and were not eliminated by the One Big Beautiful Bill Act.
High-Efficiency Electric Home Rebate Program (HEEHR/HEAR): point-of-sale rebates for income-qualified households, generally under 150% of area median income. Up to $8,000 for all-electric heat pumps, up to $4,000 for an electrical load service center, and up to $2,500 for electric wiring.
HOMES Rebate: performance-based rebates for energy efficiency upgrades that improve a single-family home’s or multi-family building’s overall energy performance.
How far along is the rollout?
Rollout is still uneven and continues to change. As of mid-2026, roughly a dozen states plus Washington D.C. have actually launched HEAR/HOMES programs, out of 55 states and territories that applied for funding. The Department of Energy issued updated program guidance on June 1, 2026, and states with existing programs had until the end of August 2026 to come into compliance. Some states that launched early, such as California, have already exhausted their initial funding and are waitlisting new applicants, while others, such as Colorado, still have active funding with hard cutoff dates. Always confirm current availability and remaining funds with the relevant state energy office before quoting numbers.
Guidance for Dealers
How should dealers leverage this now?
Federal 25C and 25D tax credits should no longer be advertised for anything installed in 2026 or later. Remove or update any sales materials that still reference them as currently available.
State and utility rebates, and the HEAR/HOMES programs where launched, are still worth mentioning, but confirm current funding status and income eligibility for the specific state before including numbers in a sales presentation.
Customers who installed qualifying equipment on or before December 31, 2025 can likely still claim 25C or 25D on that year’s tax return. This is a good touchpoint for past customers who haven’t filed yet.
Continue to advise customers to consult a tax professional for filing questions, since documentation requirements are determined by the IRS.
CEE and LMI
What is CEE?
The Consortium for Energy Efficiency (CEE) is a non-profit comprised of U.S. and Canadian energy efficiency administrators working together to accelerate the development and availability of energy-efficient products and services. CEE specifications and tiers are sometimes referenced by state rebate programs, such as HEAR and HOMES eligibility requirements. Federal 25C tier references are no longer relevant now that 25C has ended.
Is CEE the same as NEEP?
No.
What is LMI?
Low-to-Moderate Income (LMI), based on area median income (AMI), is used to determine eligibility for the rebate programs. The now-expired tax credits had no income limit.
How is LMI determined and who makes that determination?
LMI is determined at various levels (state, city, county). Please refer to the relevant state energy office or local municipal office for information about your area.
This page is provided for general informational purposes only and is not tax or legal advice. Rules can continue to change, so homeowners and dealers should confirm current details with the IRS, a tax professional, and the relevant state energy office before making financial decisions.