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Heating & cooling tax credits

Federal incentives: Tax credits & rebates What you need to know

Rheem wants to help you take advantage of new incentives that could affect how you replace your heating and cooling systems. As part of the Inflation Reduction Act of 2022, you can now take advantage of enhanced tax incentives and a new state-administered consumer rebate program that were designed to encourage you to upgrade your HVAC systems with heat pumps and high-efficiency air conditioners and furnaces. This section provides important information on the Energy Efficient Home Improvement Federal Tax Credit (Tax Section 25C) and the High Efficiency Electric Home Rebate Program.

Energy Efficient Home Improvement Federal Tax Credit (Tax Section 25C)

Originally effective January 1, 2023, with updates for the 2025 installations effective January 1, 2025, the Energy Efficient Home Improvement Federal Tax Credit (EEHI) gives you a tax credit equal to 30% of equipment and installation costs for the highest efficiency tier products, up to $600 for qualified air conditioners and $600 for qualified furnaces, as well as up to $2,000 for qualified heat pumps. Here are a few things you should know about the EEHI:

Effective January 1, 2023, through December 31, 2025

No lifetime tax credit cap

Not limited to primary residences

No income requirements

Increases the percentage of the credit from 10% to 30% of equipment and installation cost

Annual $1,200 nonrefundable tax credit for eligible HVAC systems, insulation and air sealing; and a $2,000 tax credit for eligible heat pumps

To Qualify, Homeowners Must Owe Taxes

Tax credit offsets federal taxes owed

Qualifications

Product qualifications: 2023–2024 installs

Split and Packaged Air Conditioners and Heat Pumps:

Meet or exceed CEE highest efficiency tier (excluding advanced tier)

Gas Furnaces:

≥ 97% AFUE

Learn More

Product qualifications: 2025 installs

Split and Packaged Air Conditioners and Heat Pumps:

Meet or exceed CEE highest efficiency tier (excluding advanced tier)

Gas Furnaces:

≥ 97% AFUE

Required Qualified Manufacturer ID (QMID):

K3A8

Learn More

What is CEE?
The Consortium of Energy Efficiency (CEE) is a network of gas and electric efficiency program administrators and sets CEE product tiers to differentiate highly efficient HVAC equipment for incentive and promotion programs.

Federal Tax Credit – Manufacturer Certification Form for 2023–2024 Installations

Federal Tax Credit – Manufacturer Certification Form 2025 Installations

Tax Section 25C Consumer Step-by-step Guide

Tax Section 25C Fact Sheet

High Efficiency Electric Home Rebate Program

The Electric Home Rebate Program offers consumer rebates on qualifying heat pumps, panel replacements and electrical wiring. Here are a few things you should know about the Electric Home Rebate Program:

Program launch is underway with more states being
approved each month

Funds apportioned to states based on population formula

Eligible heat pumps systems are ENERGY STAR® certified

Available tax rebates based on income

< 80% OF AREA MEDIAN INCOME

80-150% OF AREA MEDIAN INCOME

Qualifying ENERGY STAR® certified heat pumps*

Split System Heat Pumps
  • RP19AY
  • RD18AY
  • RP15AY / WP15AY
  • RP14AY / WP14AY

Ductless Mini-split Heat Pumps
  • FSHSR09B1C
  • FSHSR18B3D
  • FPHSR
  • FPHFR
  • FRHMR

*These models qualify only when installed as part of a matched system combination that meets current ENERGY STAR® criteria.

Updates by state

Since this program is at the state level, the DOE has created a map to help contractors, distributors and homeowners easily see each state’s current application status.

View the live map
Visit Energy.Gov/Save/Rebates to view the live map and review each state’s current application status.

Visit Energy.Gov

Check back here regularly to stay tuned for updates as DOE approves state rebate programs and contractor participation

As stated previously, the rebate program is restricted to residents who meet certain income criteria—and it will be up to each state to finalize the income verification process.

The DOE has recently provided updated information that gives states options to verify eligibility:

  • Income verification is required before accessing a rebate
  • Consumers can self-attest income eligibility before accessing a rebate
  • State plans will include criteria to approve contractor participation in the state rebate program
  • States will take varied approaches to establishing qualified contractor lists

TECH Clean California Program

Contractors enrolled in TECH Clean California and those new to the initiative can become certified to offer single-family HEEHRA rebates.

Frequently asked questions (FAQs)

No, replacement systems are eligible, and consumers who choose to replace an existing heat pump with a new heat pump can claim the credit.

There is no statutory prohibition on a customer claiming both a credit and rebate, but the US Treasury Department must issue final implementing rules on incentive layering.

The US Department of Energy State & Community Energy Programs Office provides consumers with additional information on the High Efficiency Electric Home Rebate Program, including income qualification rules.

More from Rheem

Find local incentives
Additional state, local and utility rebates may be available in your area. For a list of energy efficiency tax credits, visit the Rebate Center.

Maximize your saving
Get our Downloadable IRA Reference Guide to discover how you can take advantage of tax incentives.