The 25C tax credit ended: what to tell HVAC customers

What changed

From 2023, the federal Energy Efficient Home Improvement Credit, known by its tax code section, 25C, was worth 30% of qualified expenses^[1]. It was capped at $1,200 a year for most efficiency improvements and $2,000 a year for qualified heat pumps, heat pump water heaters and biomass stoves or boilers^[1]. For HVAC companies, the heat pump cap made it a regular feature of replacement proposals.

That has ended for new work. The IRS states that the credit covers qualifying property placed in service from January 1, 2023 and before December 31, 2025, so it does not apply to later installations^[1]. For customers buying now, the federal credit is not part of the decision.

This is general information, not tax advice. Customers should check their own situation with the IRS or a tax professional.

Who is still affected

Three groups of customers will ask about the credit, and each needs a different answer.

• Installed in 2025: customers whose qualifying equipment was placed in service before the IRS cut-off may be able to claim the credit on their 2025 return, filed in 2026. They will want paperwork from you.
• Quoted in 2025, installed in 2026: customers who received a 2025 proposal mentioning the credit, but whose installation slipped into 2026. They need a clear, early explanation.
• New customers in 2026: people who read older articles, ads or fact sheets and expect the credit.

Scripts for each conversation

For a 2025 installation:

For a quote that slipped into 2026:

For a new customer:

Keep the tone factual. Do not blame anyone, and do not speculate about future tax changes.

Handle proposals that mentioned the credit

If any open proposal, signed contract or financing quote mentions the 25C credit for a 2026 installation, deal with it before the customer finds out from someone else.

1. 01

   Find every affected document

   Search proposals, contracts and financing quotes issued in late 2025 and 2026 for "tax credit", "25C" and "IRS".

2. 02

   Contact each customer

   Call or write before installation, using the script above. Put the update in writing as well.

3. 03

   Revise the proposal

   Remove the credit, show the true net price and add any rebates you have confirmed.

4. 04

   Offer a decision point

   Let the customer confirm, change options or cancel if the credit was central to their decision. Follow your contract terms and any applicable cancellation rights.

5. 05

   Log the outcome

   Keep a record of each conversation and the customer's decision.

Clean up marketing and sales materials

Old claims linger longer than you expect. Review:

• Website pages, blog posts and FAQ entries about heat pumps and efficiency.
• Proposal templates and price-book descriptions.
• Google Business Profile posts and paid ads.
• Brochures, door hangers, truck wraps and showroom displays.
• Scripts used by CSRs and any automated phone or chat answers.

Even official materials can lag. A DOE Home Energy Rebates fact sheet published in 2024 told readers they could take advantage of up to $3,200 in tax credits^[2]. If customers bring older documents like that, explain that the federal credit portion has since ended for new installations.

Paperwork for 2025 installations

Customers claiming the credit for 2025 work will need documentation. Without giving tax advice, you can help by sending:

• An itemized invoice showing the equipment make, model and serial numbers, the installation date and the cost of each item.
• Manufacturer documentation for the installed equipment, where available.
• Your company details and contact information for any follow-up questions.

Send it promptly when asked, and keep copies in the job record.

Point customers to rebates instead

With the federal credit gone for new installs, rebates become the main incentive conversation. They vary a lot by location, so check before quoting any number.

• State-run federal rebates: DOE's Home Electrification and Appliance Rebates are run by states, territories and tribes, and availability varies^[2]. Where offered, the program lists maximums of up to $8,000 for an ENERGY STAR-certified heat pump, $4,000 for an electrical panel and up to $14,000 in total, with the largest rebates going to lower-income households^[2].
• Utility programs: many electric and gas utilities offer rebates for efficient equipment, often requiring a participating contractor.
• State and local programs: DSIRE, the Database of State Incentives for Renewables and Efficiency operated by the N.C. Clean Energy Technology Center at N.C. State University, lets you search policies and incentives by state^[3].

Our guide to finding utility and state rebates explains how to search, enroll and handle the paperwork.

Keep efficiency in the conversation

Efficiency still matters to homeowners without a tax credit. ENERGY STAR says nearly half of the energy used in a home goes to heating and cooling^[4], so the lifetime operating cost of a system is still a real part of the decision. Explain efficiency in terms of the homeowner's own bills, comfort and noise, not just incentives. For heat pump discussions specifically, see our guide to talking with homeowners about heat pumps.

Financing may matter more now that the credit is gone. The Federal Reserve found that 63% of US adults would cover a $400 emergency expense completely with cash or its equivalent in 2025^[5]. If you offer financing, present the full terms clearly.

Brief the whole team, not just the advisors

Customers ask about the credit at every stage: on the first call, during the estimate, at installation and when paying. Make sure everyone gives the same short answer.

• CSRs: one approved sentence about the credit ending for installations after 2025, plus an offer to check local rebates during the estimate.
• Advisors: the scripts above, the rebate search routine and the rule that no incentive amount goes on a proposal until it has been confirmed for that address.
• Technicians: a simple answer if asked on a service call, and a handoff to the office for anything detailed.
• Billing and office staff: how to produce the itemized invoice for 2025 installations quickly.

Put the approved wording in your knowledge base or CSR script and review it whenever rules or local programs change. Consistent answers prevent the situation where one person promises a credit and another has to retract it.

Keep an eye on future changes

Tax rules and incentive programs change, sometimes quickly. Assign one person to check the IRS page for energy credits, your state energy office and your main utilities' rebate pages every quarter, and to update proposals and scripts when something changes. Date-stamp any incentive information on your website so customers can see when it was last checked.

Example: one company's January clean-up

Example (fictional): An HVAC company finds 14 open proposals that mention the 25C credit for installations scheduled in January and February 2026. The office manager calls each customer, followed by a revised proposal showing the net price without the credit and any utility rebate the company has confirmed. Eleven customers go ahead, two switch to a lower-cost option and one postpones. The company also updates its website and proposal templates the same week, and adds a line to the CSR script: "The federal tax credit ended for installations after 2025, but we can check local rebates for you."