One Big, Beautiful Bill Act, One Year Later: Tax Wins, Incentive Losses

A federal tax credit that helped homeowners pay for high-efficiency heating and cooling equipment is gone. The One Big, Beautiful Bill Act, signed into law about a year ago, eliminated the Section 25C Energy Efficient Home Improvement Credit, which had offered up to $2,000 back for installing a qualifying heat pump, and up to $600 each for a high-efficiency furnace or air conditioner. Also eliminated: the Section 25D credit that covered geothermal systems and solar power, and a separate credit for builders of energy-efficient new homes. More than 2.3 million households claimed the 25C credit in 2023, the last year with full data, including nearly 268,000 for heat pumps specifically.

Despite losing the credit, heat pump sales haven't dropped. Industry shipment data for the first half of this year actually shows heat pump shipments up 3.8% compared to the same period last year, when the credit still applied. Furnace shipments were down slightly, air conditioner shipments up a bit. So if you're weighing a heat pump or other upgrade now, know that the federal tax credit that used to sweeten the deal no longer exists — you'll want to check whether your state or utility still offers its own rebates, since those vary and weren't affected by this law.

The bill did expand some workforce-training programs, including letting 529 education savings accounts and Pell Grants cover trade-school training for HVAC technicians, which could affect the pipeline of installers available in coming years, but that's not something that changes your options at home today.