HVAC Tax Credits and Rebates in 2026: How to Save $2,000+ on Your New System

Between federal tax credits, state programs, and utility rebates, you can reduce the cost of a new HVAC system by $1,500-$5,000+ depending on what you install and where you live. Most homeowners leave money on the table because they don't know what's available. Here's the complete picture for 2026.

Federal Tax Credits (Inflation Reduction Act)

The Inflation Reduction Act provides generous tax credits for energy-efficient home improvements through 2032. For HVAC specifically:

Heat pumps: Up to $2,000 tax credit for qualifying air source heat pumps. The system must meet specific efficiency requirements (CEE Tier 1 or higher). This covers the equipment cost and can be combined with other energy efficiency credits. This is the single largest residential HVAC incentive available.

Central air conditioners: Up to $600 tax credit for Energy Star Most Efficient models. The system must meet the Energy Star Most Efficient criteria for the year of installation.

Gas furnaces: Up to $600 tax credit for Energy Star certified furnaces with 97%+ AFUE. Must be Energy Star Most Efficient certified.

Boilers: Up to $600 for Energy Star certified boilers with 95%+ AFUE.

Important details: These are tax credits, not deductions - they reduce your tax bill dollar-for-dollar. They can be claimed each year (you can get a heat pump credit one year and a furnace credit the next). The heat pump credit is separate from the $600 AC/furnace credits. Total credits for all home energy improvements are capped at $3,200/year ($2,000 for heat pumps + $1,200 for other improvements).

State and Local Rebates

Many states offer additional rebates on top of federal credits. These vary widely but can add $200-$2,000+ to your savings. The Home Energy Rebate programs funded by the IRA are being rolled out by individual states through 2026-2028. These include up-front rebates (not tax credits) of up to $8,000 for heat pump installations for income-qualifying households and up to $4,000 for moderate-income households. Check your state's energy office website for current programs and eligibility.

Utility Company Rebates

Your local electric or gas utility likely offers rebates for high-efficiency HVAC equipment. Common utility rebates include $200-$500 for high-efficiency central AC, $300-$800 for qualifying heat pumps, $200-$500 for high-efficiency furnaces, $50-$150 for smart thermostats, and $200-$500 for duct sealing. Check your utility's website or call their energy efficiency department. Many also offer free or discounted home energy audits that can identify additional savings opportunities.

How to Stack Incentives

The best part: most of these incentives can be stacked. For a qualifying heat pump installation, you could claim a $2,000 federal tax credit plus a $500-$2,000 state rebate plus a $300-$800 utility rebate plus a $500-$1,500 manufacturer promotion. Total potential savings: $3,300-$6,300 off a system that costs $7,000-$10,000 installed. That can reduce your effective cost to $3,700-$6,700 - comparable to installing a basic, less efficient system without any incentives.

How to Claim the Federal Tax Credit

File IRS Form 5695 (Residential Energy Credits) with your annual tax return. You'll need the manufacturer's certification statement (proving the equipment meets efficiency requirements), your installation receipt or invoice, and the equipment model number and efficiency ratings. Keep all documentation - the IRS can request proof for up to 3 years after filing. Your HVAC contractor should provide the manufacturer's certification statement; if they don't, ask for it specifically.