2025 Government Rebates for Air Conditioning and Heating

As energy efficiency becomes a national priority, numerous government programs offer rebates and incentives to homeowners who upgrade their HVAC systems. These programs can significantly offset the cost of installing new air conditioning and heating units, making energy-efficient options more affordable. Here’s an updated guide to government rebates for air conditioning and heating in 2025.

2025 Federal Tax Credits and Rebates

The terms and conditions of government rebates or grants can differ depending on the time of year, location, and other variables. Modernize recommends checking with the Database of State Incentives for Renewables & Efficiency to see if you’re eligible before applying or hiring a contractor. This maximizes your chances of securing the funds, and it also gives your contractor all the info they need before the project starts.

HVAC Tax Credits vs. HVAC Rebates: What’s the Difference?

When exploring financial incentives for upgrading to an energy-efficient HVAC system, it’s important to understand the distinctions between federal tax credits and state or local rebates. Knowing how these incentives work can help you maximize your savings.

Tax Credits: According to the IRS, a tax credit is a dollar-for-dollar reduction of the amount of tax you owe. These credits are typically claimed when you file your federal tax return and can significantly offset the cost of qualifying HVAC upgrades.

Rebates: A rebate is either a point-of-sale discount or a delayed refund. The specifics of how a rebate is applied depend on the organization offering it, whether it’s a state energy program, a utility company, or an HVAC manufacturer. Rebates are often immediate and reduce your upfront costs.

Both options provide valuable savings, but their application and timing differ. Let’s explore these incentives in more detail to help you take full advantage of them.

Energy-Efficient Home Improvement Tax Credit

The federal government offers tax credits for homeowners who install energy-efficient HVAC systems. Under the Energy Efficient Home Improvement Tax Credit (extended through 2025):

• Credit Amount: Up to 30% of the cost of the system, with a maximum of $600 for air conditioning units and $2,000 for heat pumps.
• Eligible Equipment: Must meet the criteria set by the Consortium for Energy Efficiency (CEE) or ENERGY STAR® standards.
• Documentation: Save all receipts and the Manufacturer’s Certification Statement for your records.

Additionally, a home energy audit may qualify for a tax credit of up to $150.

High-Efficiency Electric Home Rebate Act (HEEHRA)

The HEEHRA, part of the Inflation Reduction Act of 2022, provides significant rebates for installing high-efficiency electric HVAC systems:

• Rebate Amount:
  • Up to $8,000 for heat pumps
  • $1,750 for heat pump water heaters
  • $840 for electric HVAC systems.
• Eligibility: Households earning up to 150% of the area median income.
• Application Process: Typically through participating HVAC contractors.

ENERGY STAR Rebates

This program — which is run by the U.S. Environmental Protection Agency (EPA) and U.S. Department of Energy (DOE) to promote energy efficiency — offers rebates and special offers based on a homeowner’s location. Find out if you’re eligible for savings by visiting ENERGY STAR’s Rebate Finder. 

The Residential Energy Efficient Property Credit

As noted by the IRS, there are a number of incentives offered by the federal government in exchange for making your home energy efficient. Homeowners should consult with their contractor for more insight on projects that are eligible for tax credits. For more information, visit the IRS’s page on energy incentives. 

U.S. Department of Agriculture (USDA) Programs and Grants

The USDA offers funding to help low-income families secure housing as well as for home repairs and preservation. Homeowners can contact their local representative or RD State office for more information. 

Weatherization Assistance Program

This program is offered by the U.S. DOE to help low-income families increase their home’s energy efficiency and in turn, reduce energy costs. It covers cleaning, tuning, repairing or replacing a house’s heating and/or cooling systems. The program also notes that by weatherizing a house with the department’s assistance, the home’s “energy burden” is in turn alleviated since the home can become better insulated, sealed, and ventilated. More information on the program is available through this fact sheet. To apply, contact your state weatherization agency. 

Housing Improvement Program

An incentive offered by the U.S. Bureau of Indian Affairs (BIA), this program offers home repair assistance to eligible low-income American Indian and Alaska Native families. Interested homeowners can apply by filling out BIA Form 6407 with their closest housing office. 

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2025 State and Local Rebates

State and local governments also offer rebates and incentives, which can vary widely by location. Here are some examples:

California

• Rebate Programs: California offers rebates through the California Public Utilities Commission and local utility companies.
• Amount:
  • Up to $6,000 for heat pumps.
  • Up to $1,000 for energy-efficient air conditioning systems.
• Additional Programs: The Self-Generation Incentive Program (SGIP) provides incentives for energy storage systems paired with HVAC upgrades.

New York

• Rebate Programs: NYSERDA’s Home Performance with ENERGY STAR® program offers substantial rebates.
• Amount:
  • Up to $5,000 for HVAC upgrades
  • Additional rebates are available for low-income households.
• Additional Support: Free energy audits and low-interest financing options.

Texas

• Rebate Programs: Texas offers rebates through the Texas Efficiency Program and local utility providers.
• Amount: Up to $2,000 for qualifying HVAC systems.
• Special Programs: Some utilities offer additional rebates for installing smart thermostats and performing home energy audits.

Utility Company Rebates

Many utility companies provide rebates to encourage customers to upgrade to energy-efficient HVAC systems. These rebates can often be combined with federal and state incentives.

Examples of Utility Rebates

• PG&E (Pacific Gas and Electric): Rebates up to $900 for high-efficiency heat pumps.
• Duke Energy: Up to $300 for HVAC replacement.
• Con Edison: Rebates up to $8,000 for energy-efficient air source heat pumps and $10,000 for income qualifying households.

Manufacturer Rebates

In addition to government and utility rebates, many HVAC manufacturers offer their own incentives:

• Carrier: Seasonal promotions with rebates up to $1,650 on qualifying systems.
• Lennox: Rebates up to $1,200 during promotional periods.
• Trane: Offers trade-in allowances and rebates up to $1,000.

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How to Apply for Rebates

Applying for these rebates generally involves a few straightforward steps:

1. Research: Identify available rebates and eligibility requirements through federal, state, and local government websites, as well as your utility company.
2. Purchase Qualifying Equipment: Ensure the HVAC system meets the specified energy efficiency standards.
3. Save Documentation: Keep all receipts, certification statements, and any required forms.
4. Submit Applications: Follow the application process outlined by the rebate provider, which may include online forms or mail-in applications.
5. Consult Professionals: Work with a licensed HVAC contractor who can help navigate the rebate application process.

Government rebates for air conditioning and heating in 2025 make it easier and more affordable for homeowners to upgrade to energy-efficient HVAC systems. By taking advantage of these programs, you can reduce your upfront costs and enjoy long-term savings on your energy bills.

Ready to upgrade your HVAC system? Contact local professionals to learn more about available rebates and start your energy-efficient upgrade today!