There is no federal tax credit for a heat pump, air conditioner or furnace installed in 2026: the Section 25C Energy Efficient Home Improvement Credit was terminated for property placed in service after December 31, 2025 under Public Law 119-21 (the “One Big Beautiful Bill”), and nothing has replaced it at the federal level for residential HVAC. If your equipment was installed and operating on or before December 31, 2025, you can still claim it on your 2025 return; for a 2026 install, the incentives that remain are state and utility programs, which in North Carolina are substantial.
What 25C was
From 2023 through 2025, 25C paid a nonrefundable credit of 30% of cost, up to $2,000 per year for a qualifying heat pump (or heat pump water heater), and up to $1,200 per year for other qualifying improvements including central AC and furnaces (capped at $600 per item), with the two caps independent so a homeowner could claim up to $3,200 in one year. It applied to existing primary residences, required the equipment to meet the applicable efficiency tier, and, for 2025 installs, required the equipment to come from a registered qualified manufacturer with a QMID reported on the return.
What changed
The credit was allowed only for property placed in service through December 31, 2025. The IRS instructions for the 2025 Form 5695 state plainly that you can’t claim the credit for expenditures or property placed in service after that date, and the IRS FAQ on the law’s changes confirms that if installation is completed after December 31, 2025, the expenditure is treated as made after that date and no credit is available. “Placed in service” means installed and operational; paying a deposit or signing a contract in 2025 doesn’t count if the system went in later.
If you installed in 2025
Claim it on your 2025 return with Form 5695, Part II. You’ll need the invoice showing equipment and installation cost, the manufacturer’s certification statement that the model met the efficiency requirements, and the QMID for the equipment. If you already filed without claiming it, an amended return is the route; a tax professional can confirm.
What replaced it for 2026 buyers
For most homeowners, nothing at the federal level for HVAC. The action moved to states and utilities. In North Carolina that means Energy Saver NC (up to $8,000 toward a heat pump for income-eligible households, applied at point of sale) and utility rebates from Duke Energy and others, which stack. Households above the state program’s income limits are limited to utility rebates. Details: Energy Saver NC explained and how the incentives stack.
What this does to the buying decision
The federal credit had tilted many decisions toward higher-efficiency equipment; without it, the payback on a premium tier depends more on your usage, your utility rates and the state program’s income tiers. It has not changed the underlying answer in North Carolina’s climate: a properly sized heat pump remains the best-value system for most homes, and the state rebate favours it. Current installed prices are on the heat pump cost page, and every contractor on the North Carolina registry shows the license status we found.