If you’ve been thinking about replacing your old furnace and air conditioning system, or water heater, we’ve got some important news: 2025 is your final opportunity to take advantage of some really generous federal tax credits.
And we’re not just talking about a few bucks here – we’re talking up to $2,000 back on your taxes for certain upgrades.
With the holidays right around the corner, now’s actually the perfect time to tackle this project. While everyone else is scrambling with Thanksgiving preparations and year-end tasks, getting your new system installed now means you’ll beat the December rush and have one less thing to worry about before the year wraps up.
Here’s the deal: new federal legislation has accelerated the end date for several home energy tax credits, and the IRS has confirmed that for most heating, cooling, and water heating equipment, the deadline is December 31, 2025. That means if you want to claim these credits, your new system needs to be installed and up and running by the end of this year.
What qualifies for the tax credit?
The good news is that a lot of common home comfort equipment still qualifies for 2025 installations. Let’s break down what’s eligible and how much you could save.
Heat pumps are the big winner here – you can get 30% of the cost back, up to $2,000, if you install a qualifying air-source heat pump matching system this year. Heat pumps are pretty awesome because they both heat and cool your home efficiently.
If you’re looking at a traditional gas, you can still get a tax credit of 30% of the cost, up to $600, as long as it’s a high-efficiency model that meets the program requirements.
Water heaters can qualify too. If you’re installing a heat pump water heater (which uses far less energy), you can get up to $2,000 back – the same as a full heat pump system.
One thing to keep in mind: there’s an overall annual cap of $3,200 total across all your home energy improvements for the year. That breaks down to up to $2,000 for heat pumps and heat pump water heaters, plus up to $1,200 for other stuff like furnaces, windows, and doors combined.
The fine print you need to know
Here’s where timing really matters. The IRS is pretty specific about this: your equipment has to be “placed in service” by December 31, 2025. That’s tax-speak for “installed and actually working.” Just ordering a system or signing a contract doesn’t count – it needs to be up and running in your home by year’s end.
One more important thing: these are non-refundable tax credits, which means they can reduce your tax bill to zero, but if the credit is bigger than what you owe in taxes, you don’t get the extra back as a refund. And you can’t carry any unused portion forward to next year either. So it’s worth thinking about your overall tax situation when planning your purchase.
How do you actually claim the credit?
The process is pretty straightforward. First, make sure you’re choosing equipment that qualifies.
Get everything installed by December 31st and keep all your paperwork – invoices, model numbers. You’ll need all of this for your tax records.
Then when you file your 2025 tax return in 2026, you’ll use IRS Form 5695 to claim the credit. The form has a specific section for the Energy Efficient Home Improvement Credit, and it walks you through calculating what you can claim.
What happens after 2025?
Based on current IRS guidance, these tax credits for heating, cooling, and water heating equipment end after December 31, 2025. Some other energy incentives have later deadlines, but those cover different things like EV chargers or commercial projects. There might still be state or utility rebates available after this year, but the federal tax credits we’re talking about here are wrapping up.
The bottom line is this: if you’ve been putting off replacing that aging furnace or inefficient AC system, now’s the time to pull the trigger. Not only will you get a more reliable, energy-efficient system that’ll save you money on your utility bills, but you’ll also get a nice chunk of change back at tax time.
Ready to take advantage of these tax credits?
Time is ticking on these incentives, and our schedule fills up fast – especially as we head into the holiday season and approach the end of the year.
You’ve got enough on your plate with Thanksgiving dinner and holiday planning. Let us handle getting your home comfort upgrade done before the deadline. If you’re interested in a new furnace, heat pump, or water heater, we’d love to help you figure out what qualifies and get you set up before the deadline.
Even if you’re not sure whether it makes sense to upgrade right now, feel free to reach out with any questions at (319) 208-6433. We’re happy to talk through your options, explain what equipment would qualify for the tax credits, and help you understand what kind of savings you’re looking at – both on your taxes and your monthly energy bills.
Schedule service with Gubbels today, and let’s make sure you don’t miss out on this last chance to save.