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Your 2025 Guide to Federal, State, & Utility Incentives
Total Potential Savings
By stacking federal, state, and utility offers.
Your Two Paths to Federal Savings
The Inflation Reduction Act offers two main types of incentives for homeowners, which must be installed by December 31, 2025. You can often combine a tax credit with *one* of the two rebate programs, but not both rebates together.
Path 1: Tax Credit (25C)
This is a non-refundable credit you claim on your taxes. It reduces the amount of tax you owe, dollar-for-dollar.
- Who: Any homeowner (no income limits).
- What: 30% of project cost.
- Cap: $3,200 total annual cap.
- How: File IRS Form 5695 with your 2025 taxes.
Path 2: Direct Rebates
These are point-of-sale discounts or post-install rebates administered by your state. They are income-dependent.
- Who: Low-to-Moderate Income (LMI) households.
- What: Covers 50-100% of project cost.
- Cap: Up to $14,000 (HEEHRA).
- How: Applied by contractor at point of sale.
What Equipment Gets the Biggest Bucks?
Federal programs are designed to push homeowners toward electrification. As a result, electric heat pumps and heat pump water heaters receive the largest incentives by a wide margin, especially under the HEEHRA rebate program.
Key Takeaway: An ENERGY STAR certified electric heat pump is the single most valuable upgrade, eligible for up to $8,000 from HEEHRA or $2,000 from the 25C tax credit.
State-Level Support Varies Widely
In addition to federal funds, states offer their own programs. These are often stackable with federal incentives and vary dramatically, with states like New York and Massachusetts offering amounts that can exceed federal caps.
Key Takeaway: Homeowners in states with aggressive climate goals (like NY, MA, and CA) have access to thousands more in potential rebates. Always check your state's energy office (e.g., NYSERDA, Mass Save).
Your Utility Company May Pay You, Too!
Finally, check your personal electric utility provider. Most offer their own rebates to reduce demand on the grid. These are typically smaller ($500 - $1,500) but are easy to claim and stack with all other incentives.
Key Takeaway: Utility rebates are a common, stackable bonus. Check your provider's website (e.g., PG&E, Duke Energy, ComEd) for "rebates" or "energy efficiency" programs.
Your 5-Step Path to Savings in 2025
Navigating these programs can seem complex, but it boils down to a clear process. Follow these steps to maximize your savings on a new HVAC system.
Research & Find
Use the ENERGY STAR Rebate Finder and DSIRE database (dsireusa.org) with your ZIP code to find all federal, state, and utility rebates you qualify for.
Buy Your System
For the most savings, purchase a high-efficiency heat pump system directly from AC Direct. Heat pumps offer the best year-round value and qualify for the largest incentives.
Find a Contractor
Once you have your system, contact qualified local contractors to get quotes for installation. Ensure they are certified to install your equipment.
Install & Pay
Select a contractor to get your new system installed. The installation must be completed by December 31, 2025. Get detailed, itemized invoices.
Claim Your Money
Submit invoices to your utility or state for post-install rebates. For the 25C credit, save your receipts and file IRS Form 5695 with your 2025 tax return (filed in 2026).