Tax Credits & Rebates

Save Big with Federal Tax Credits for High-Efficiency HVAC

Thanks to the Inflation Reduction Act (IRA) and updates to Section 25C, homeowners can now receive valuable federal tax credits when they install qualifying energy-efficient HVAC systems. These incentives are available through 2032, with updated requirements starting January 1, 2025.

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What You Can Claim

Section 25C – Energy Efficient Home Improvement Credit

Up to $3,200/year in tax credits

• 30% of installation costs for qualifying equipment
• Up to $600 for Air Conditioners or Furnaces
• Up to $2,000 for eligible Heat Pumps
• Heat pump credit is separate from the $1,200 annual cap

Applies to existing homes and renovations — not new construction

Labor costs can be included for HVAC installation, but not for insulation or windows

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What’s New in 2025

Effective January 1, 2025, new CEE (Consortium for Energy Efficiency) criteria apply to 25C-eligible systems:

All systems must meet the highest CEE Tier (excluding Advanced Tier)

Key Changes:

• Split Ducted Heat Pumps:
  • North/South region designations removed
  • Two performance paths available
  • Higher SEER2 requirements
• Ductless Heat Pumps: Now follow same criteria as ducted systems
• Packaged Heat Pumps & AC Units:
  • Regional criteria removed
  • Stricter SEER2 standards

View the latest CEE HVAC Specification

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Section 25D – Residential Energy Efficient Property Credit

This credit covers renewable energy systems like solar panels. For HVAC, it mainly applies to geothermal heat pumps and solar water heaters.

• 30% of system cost through 2032
• Drops to 26% in 2033, 22% in 2034

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In addition to federal tax credits, many Kentucky homeowners may qualify for rebates through their local electric or gas utility. These rebates can help offset the cost of qualifying HVAC upgrades and energy-efficient improvements.

Start Here: DSIRE – Database of State Incentives for Renewables & Efficiency

• Use the search tool to filter Kentucky programs by utility and technology.
• You can also contact your local utility provider (e.g., KU, LG&E, Blue Grass Energy) for current rebate offerings.

Disclaimer: Please note that all rebates, credits, and incentives are subject to change without notice. Madison HVAC/R, LLC does not control these changes and is not responsible for any differences that may arise. For the most accurate and updated information, we strongly advise consulting with your tax professional.