The end of four HVAC tax incentives became closer to reality after a late night of voting by the U.S. Senate. Republicans in the Senate were able to narrowly pass President Donald Trump’s “big, beautiful bill” after Vice President JD Vance cast the tie-breaking vote Monday night.
Every Democrat and three Republicans — Susan Collins of Maine, Rand Paul of Kentucky, and Thom Tillis of North Carolina — voted no.
On the residential side of the HVAC market, Section 25C and 25D will be repealed for projects starting after Dec. 31, 2025. These were designed to encourage homeowners to invest in energy-efficient and clean energy improvements.
Section 25C, the energy efficient home improvement credit, was worth up to $3,200 annually for qualifying home upgrades, and had become a key driver of energy-efficient HVAC equipment. The maximum credit that can be claimed each year is $1,200 for energy-efficient property costs and certain energy-efficient home improvements, with limits on exterior doors ($250 per door, $500 total), exterior windows and skylights ($600), and home energy audits ($150), and $2,000 per year for qualified heat pumps, water heaters, biomass stoves, or biomass boilers, per the IRS.
“The Inflation Reduction Act’s improvements to 25C do make it far more valuable for contractors, and we saw that in our recent town hall surveys, more than twice as many contractors picked the energy efficiency incentives as being their top tax priorities over things like small business taxes and individual rates,” said Sean Robertson, vice president of membership, advocacy and events at Air Conditioning Contractors of America (ACCA). “And among the efficiency tax incentives, 25C was also by far the most popular.”
Section 25D, residential clean energy credit, included a 30% federal tax credit for geothermal heat pumps.
Section 45L and 179D are set to end for projects beginning after June 30, 2026.
Section 45L offers tax credits to homebuilders and developers who construct or substantially reconstruct energy-efficient residential homes, while Section 179D provides tax deductions for building owners and designers who implement energy-efficient improvements in commercial buildings.
The stage is now set for a final vote in the House on this legislation. If it passes the House, it will go to President Trump for his signature. The president has said he wanted to bill on his desk by July 4.