What’s at stake as HVAC tax credits hit the chopping block

Eliminating a pair of HVAC-focused tax credits starting next year, which the House’s ‘big, beautiful bill’ proposes, will strain both the grid and contractor jobs nationwide, according to new research by nonprofit Rewiring America. 

The big picture: The credits, known as Sections 25C and 25D, were claimed on over 3.5 million tax returns in 2023 (the latest available data), according to the IRS. Both are available to homeowners who install qualifying air conditioners, heat pumps, and furnaces. 

What’s happening: Rewiring America analyzed the credits’ impact across eight states, showing what’s at stake should the bill get signed into law. In 2023, nearly 150,000 families in Texas and over 60,000 in North Carolina, for instance, claimed the Section 25C credit, resulting in around $840 and $1,000 in tax savings, respectively. 

Zoom in: The credits also enable reductions in energy demand, freeing up grid capacity for data centers being built to support the growing use of artificial intelligence. 

• In Texas alone, widespread homeowner adoption of Section 25C would cut demand by six gigawatts — enough energy to power 171 data centers running at full capacity, per the research. 
• The same adoption in North Carolina would cut energy demand equivalent to an additional 31 data centers. 
• View the impacts on the remaining six states

Meanwhile, a March study by Rewiring America found that consumer demand generated by both Section 25C and 25D supports 118,000 ‘local installation’ jobs nationwide.

• “The… jobs only exist if people are buying the products, so we can’t overlook the demand side of the equation,” said David Friedman, a director at Rewiring America. 
• “These tax credits support consumer spending and in turn support the jobs of truck drivers hauling the equipment… and the people in your community installing it,” he added. 

State of play: The HVAC industry has long supported the incentives, with over 1,000 contractors nationwide signing an April letter urging Congress to preserve Section 25C. 

Of note: With the bill now heading to the Senate, some Republicans have signaled they might reconsider the House’s proposed cuts to the Inflation Reduction Act, which includes Sections 25C and 25D. 

• “I don’t think there are any [IRA cuts], or I can’t think of many, that we would take just word-for-word, as is, but it’s a good foundation to build on,” North Carolina Senator Thom Tillis said in May. “We’re not done till we’re done,” added Florida’s Vern Buchanan. 

What to watch: While there’s been no word surrounding the HVAC credits, in particular, since the bill’s passing, Congress aims to send a final version to Trump’s desk by July 4.