The Inflation Reduction Act of 2022 (IRA, Public Law 117-169), signed August 16, 2022, was a broad federal law whose energy provisions reshaped HVAC incentives. For home heating and cooling, the IRA did three main things. It expanded the Internal Revenue Code Section 25C Energy Efficient Home Improvement Credit to 30% of cost with a $2,000 annual cap for heat pumps. It set the Section 25D Residential Clean Energy Credit at a flat 30% for solar, geothermal heat pumps, and battery storage. And it funded two new state-administered rebate programs — the Home Efficiency Rebates (HOMES) and the High-Efficiency Electric Home Rebate program, now administered as Home Electrification and Appliance Rebates (HEAR).
The two pillars worked differently. The tax credits were claimed on a federal return: Section 25C offset up to $2,000 a year on a qualifying heat pump and $600 on high-efficiency AC or a furnace, while Section 25D paid 30% of a geothermal or solar project with no dollar cap. The rebate programs, by contrast, send IRA money to state energy offices, which run the programs locally — roughly $4.3 billion for HOMES, scaled to whole-home energy savings, and about $4.5 billion for HEAR, an income-qualified point-of-sale program paying up to $8,000 toward a heat pump within a $14,000 household cap. Both rebate pools are available until September 30, 2031 or until the funds are depleted.
The IRA itself remains law, but its marquee HVAC tax credits no longer apply to current installs. The One Big Beautiful Bill Act of 2025 (OBBBA, Public Law 119-21), signed July 4, 2025, repealed both Section 25C and Section 25D for property placed in service after December 31, 2025. So for a 2026 install, the IRA-era 30% federal tax credits are gone. What survives is the rebate side: OBBBA did not terminate the HOMES or HEAR programs, and their funding remains authorized through September 30, 2031 or depletion. Those rebates are administered state by state, and rollout has been uneven — some states were paying rebates by 2025 while others had not launched as of early 2026. In short, the IRA's tax-credit pillar was repealed, while its rebate pillar continues where states have stood the programs up.
For a 2026 buyer, the headline is that the IRA's federal tax credits can no longer be claimed on a new install, which removes up to $2,000 (air-source heat pump) or an uncapped 30% (geothermal or solar) from the math. The remaining IRA-derived help is the HOMES and HEAR rebates, if the buyer's state has launched them and the household qualifies, layered on top of utility rebates like SRP Cool Cash or CPS Energy STEP. Whether a given household can stack these depends on state program rules and income tier. Because the tax-credit changes turn on placed-in-service dates and the rebate rules vary by state, consult a tax professional and the relevant state energy office for current eligibility.