Federal Tax Credits for Air Conditioners and Heat Pumps: Updated 2025
Not only can upgrading to a more energy efficient air conditioner or heat pump lower your energy bills but, for a limited time, it can also save you some cash come tax season.
On January 1, 2023, federal tax credit provisions under the Inflation Reduction Act came into effect. The Energy Efficient Home Improvement Credit aimed to help reduce the cost of certain upgrades to homes and businesses—including air conditioners, heat pumps, and other home appliances and upgrades.
The original plan was for these tax credits to be available for equipment installed between January 1, 2023 and December 31, 2032. But now, following the passage of the One Big Beautiful Bill Act (OBBA) in July 2025, the Energy Efficient Home Improvement tax credit will expire December 31, 2025.
What Tax Credits are Available?
Homeowners may qualify for a tax credit that equals 30% of qualifying expenses on certain upgrades to your home’s energy efficiency. The maximum credit per year is $3,200 through 2025. The following types of equipment and improvements are eligible when they meet certain specifications:
- Air Source Heat Pumps
- Air conditioners
- Furnaces
- Heat pump water heaters
- Insulation
- Doors and windows
- Electrical panel upgrades
- Home energy audits
- And more
For a full list of home improvements that qualify for tax credits, visit energystar.gov.
Annual Aggregate Limits
While the maximum credit is $3,200 per year, there are also limits on certain types of qualifying equipment and upgrades in the following two categories:
- Up to $2,000 per year for any combination of air source heat pump, heat pump water heater, and biomass stove/boiler upgrades.
- Up to $1,200 per year for any combination of central air conditioners, furnaces, and boilers, plus improvements to the home envelope (windows, doors, skylights, insulation, electrical).
Because of the annual aggregate limits above, spreading your home energy efficiency upgrades over a few years with allow you to maximize your savings. Also, GeoThermal heat pumps and other renewable energy equipment are eligible for a separate tax credit (the Residential Clean Energy Credit). Upgrades under that credit do not count against the $3,200 annual limit for Energy Efficient Home Improvement tax credits.
What Federal Tax Credits are Available for Air Conditioners and Air Source Heat Pumps?
There are also limits on how much credit you can receive per project. Below, you’ll find more details about the federal tax credits available for air conditioners and heat pumps. To learn more about the tax credits available for other types of home energy efficiency upgrades, refer to energystar.gov.
Air Conditioners
- You can claim: 30% of the project cost, up to a $600 maximum limit, of systems meeting the requirements below.
- Effective January 1, 2025, split system central air conditioners must meet SEER2 ≥ 17.0 and EER2 ≥12.0 to be eligible. Packaged central air conditioners must meet SEER2 ≥16.0 and EER2 ≥11.5 to be eligible.**
- The air conditioning system must be purchased and installed between January 1, 2023, and December 31, 2025.
Air Source Heat Pumps
- You can claim: 30% of the project cost, up to a $2,000 maximum limit, of systems meeting the requirements below.
- Starting January 1, 2025, air source heat pumps that are recognized as ENERGY STAR Most Efficient are eligible for this credit. There are two pathways (below) that consumers and contractors can choose regardless of the home’s location. There is no longer a regional requirement.***
- Pathway 1: heating-dominated applications (i.e., cold climates), and the relevant eligible products will be designated as ENERGY STAR Cold Climate.
- Pathway 2: cooling-dominated and dual-fuel applications (e.g., a heat pump paired with a furnace).
- The heat pump system must be purchased and installed between January 1, 2023, and December 31, 2025.
Qualifying York HVAC Equipment
Unsure of whether your new air conditioner or heat pump qualifies for the tax credit? Refer to ENERGY STAR’s list of eligible Ask your Symbiont Service HVAC installer. We may also be able to provide you with a Manufacturer Certification Statement.
Does My Home Qualify?
The Energy Efficient Home Improvement tax credit is for residential properties only, with some restrictions. The following applies to central air conditioners and electric or natural gas heat pumps:
- The home must be used as a residence, including a second home, by the taxpayer (includes renters who make eligible improvements).
- The home may be a:
- House
- Houseboat
- Mobile home
- Cooperative apartment
- Condominium
- Manufactured home
- The property must be in the United States.
- It must be an existing home that you improve or add onto. This credit does not apply to a newly built home.
- You may not claim the credit if you’re a landlord or other property owner and you do not live in the home.
What About Tax Credits for Air Conditioners or Heat Pumps Purchased in 2022 or Earlier?
Did you invest in a new air conditioner or heat pump in 2022 or before? If you haven’t already done so, you may be able to claim a tax credit under the Non-Business Energy Property Credit. Read more about the 2022 tax credits.
Are There Tax Credits for Homebuilders and Commercial Properties?
If you are a home builder or a commercial building owner/designer, you may be eligible for separate tax credits. Read more at the links below:
What About Tax Credits for GeoThermal HVAC Systems?
There are also tax credits for renewable energy upgrades, including GeoThermal heat pumps, available under the Residential Clean Energy Credit. Tax credits received for GeoThermal systems and other renewable energy upgrades do not count toward the $3,200 annual limit under the Energy Efficient Home Improvement tax credits. Learn more about the tax credit for GeoThermal AC systems.
How Do I Apply for the Tax Credits?
To claim the tax credits, you will need to fill out IRS form 5695, Residential Energy Credits and file it with your tax returns. See these changes to requirements for claiming the Energy Efficient Home Improvement Tax Credit in 2025.
Important Information
- You cannot get back more on the credit than you owe in taxes, as the credits are nonrefundable. You may not apply any excess credit to future tax years.
- If you received subsidies, rebates, or other financial incentives toward your air conditioner or heat pump purchase, you may need to subtract these from your expenses when you calculate your tax credit.
- We highly recommend consulting a tax professional for advice on claiming tax credits. Tax credits are administered by the IRS, and the credit amounts you may receive are subject to IRS regulations. For the most current information on federal tax credits, please visit energystar.gov and IRS.gov.
DISCLAIMER: The tax credit information contained within this website is provided for informational purposes only and we do not guarantee the accuracy of the information provided. It is not intended to substitute for expert advice from a professional tax/financial planner or the Internal Revenue Service (IRS). Symbiont Service Corp does not offer tax advice. We recommend you talk to your accountant or other tax professional. For the most up-to-date information on federal tax credits, please visit energystar.gov and IRS.gov.
**Note from ENERGY STAR: Note: Under the tax code, eligible equipment must “meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year.” The eligibility described above is consistent with this requirement.
***Note from ENERGY STAR: Under the tax code, eligible equipment must “meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year.” The eligibility described above is consistent with this requirement.
Sources:
- ENERGY STAR (EPA) – Federal Tax Credits for Energy Efficiency. (n.d.). ENERGY STAR.
- ENERGY STAR (EPA) – Central Air Conditioners Tax Credit. (n.d.). ENERGY STAR.
- ENERGY STAR (EPA) – Air Source Heat Pumps Tax Credit. (n.d.). ENERGY STAR.
- TurboTax (Intuit) – Adams, R., CPA. (Updated August 22, 2025). 2024-2025 Energy Tax Credit: Which Home Improvements Qualify? TurboTax.
Last Updated: August 2, 2025
Stay In The Loop
Don't miss out! Like us on Facebook or subscribe to our RSS Feed on Feed Burner and get our latest posts. Our symbiontairconditioning.com blog includes posts about topics related to air conditioning and our company. Posts about additional topics can be found on our main company blog at symbiontservice.com/blog/.
