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The short version: the federal 25C and 25D credits expired for systems placed in service after December 31, 2025. If a contractor is still quoting you a 30 percent federal credit in 2026, they are working from stale marketing. Here is what is actually left.
I am Jorge, owner of SoCal AC Guy in Temecula — C-20 HVAC, CA Lic. #1070401, ten-plus years in this valley. I am writing this one because I keep cleaning up after other people’s sales pitches. Homeowners in Murrieta and Menifee are being handed proposals in 2026 with a line reading “less 30% federal tax credit, up to $2,000.” That line is wrong, and if you sign a contract whose math depends on it, you are the one who eats the difference.
Here is the honest 2026 landscape: the federal residential HVAC credits are gone, the money moved to state, air-district and utility programs, and several of those are fully reserved. Not great news. But knowing it accurately is worth more than hoping otherwise, so let us go through it properly.
The Energy Efficient Home Improvement Credit — Section 25C — is the one most homeowners meant when they said “the heat pump tax credit.” Under the Inflation Reduction Act it covered 30 percent of qualifying project costs with an annual cap of $2,000 for heat pumps and heat pump water heaters, plus $1,200 for other envelope and equipment improvements.
The One Big Beautiful Bill Act, signed July 4, 2025, terminated it early. Property placed in service after December 31, 2025 does not qualify. “Placed in service” means the installation is complete and the equipment is operational — not when you ordered it, not when you paid the deposit, not when the equipment showed up on the truck. A system that arrived in December 2025 but was commissioned in January 2026 is not eligible.
The one exception worth knowing: if your qualifying system was installed and operational on or before December 31, 2025, you can still claim it on your 2025 federal return during the 2026 filing season using IRS Form 5695. Dig out the invoice, the model and serial numbers and the AHRI certificate. That window is closing, not open.
The Residential Clean Energy Credit — Section 25D, the 30 percent credit covering solar, battery storage and geothermal heat pumps — was terminated on the same timeline for property placed in service after December 31, 2025. For the handful of Inland Empire homeowners who were considering ground-source geothermal, that changes the payback math substantially. Air-source heat pumps were never covered by 25D anyway; they lived under 25C.
| Line item on a 2026 proposal | Status | What to do |
|---|---|---|
| “Less 30% federal tax credit” | Not available | Ask the contractor to remove it and requote. Then ask what else on the page is out of date. |
| “Up to $2,000 IRS heat pump credit” | Expired 12/31/2025 | Same. Treat it as a red flag about the whole proposal. |
| “HEEHRA / IRA rebate” | Single-family fully reserved statewide 2/24/26 | New reservations go on a waitlist. Do not finance against it. |
| “TECH Clean California incentive” | Single-family fully reserved 11/14/25 | Commercial closed 10/31/25. Verify before relying on it. |
| “AQMD GO ZERO rebate” | Pilot; opens and pauses | Real money when open. See our GO ZERO guide. |
| “SCE heat pump rebate” | Active utility program | Best current option for most homes. See how to claim it. |
Program status as verified in 2026. These change; confirm directly with the administering agency before signing anything.
Federal credits are out. Here is the replacement stack for a Temecula, Murrieta or Menifee homeowner, in the order I would chase it:
Send me a photo of it. I will tell you which lines are current and which are wishful thinking — whether or not you end up hiring me.
If you own a rental in Hemet or a small commercial building in Old Town Temecula, the residential credits never applied to you anyway. Commercial HVAC upgrades are generally handled through depreciation and expensing rules rather than a homeowner credit, and Section 179 treatment of qualifying HVAC property on nonresidential buildings is the mechanism most owners use. That is a CPA conversation with real dollars attached — I am an HVAC contractor, not a tax advisor, and you should get the specifics from someone licensed to give that advice.
Even with the federal credits gone, keep the paperwork. Utility rebates, air-district incentives, warranty claims, and the eventual home sale all want the same items. After every install I leave customers with:
If you want to know what those numbers on the data plate mean, our AC model number decoder walks through it.
A little, and mostly at the margins. The 25C credit made the jump from a mid-tier system to a high-efficiency heat pump easier to justify because the federal government covered part of the premium. Without it, the efficiency upgrade has to pay for itself on utility savings alone.
In our climate that is still a defensible case — SCE rates are high, cooling season runs from May into October, and the difference between a 14 SEER2 system limping along and a properly sized modern one shows up on every summer bill. But the case is thinner than it was. If you were choosing between a well-installed 15.2 SEER2 system and a 20 SEER2 premium unit, the gap in payback just got longer. Our SEER vs SEER2 explainer and brand comparison cover the tradeoff.
What has not changed: installation quality beats equipment tier every time. A correctly sized, correctly charged, correctly ducted mid-tier system from Carrier, Trane, Lennox or Goodman will beat a premium Daikin or Mitsubishi Electric unit that was thrown in over undersized ducts. Spend the money there.
People ask, and it is worth understanding because it tells you something about how much to bet on the next program. The 25C and 25D credits in their expanded form came out of the Inflation Reduction Act in 2022, with statutory end dates in the 2030s. The One Big Beautiful Bill Act, signed July 4, 2025, pulled those dates forward to December 31, 2025. Nothing about the equipment changed and nothing about the energy math changed — the funding decision changed.
The lesson I take from it, and the one I pass to customers in Temecula and Murrieta, is that incentive programs are policy, and policy moves. State and utility programs behave the same way: TECH Clean California and HEEHRA did not fail, they simply ran out of allocated money and closed to new single-family reservations. That is a normal outcome for a funded program, not a scandal. It just means you plan around the equipment decision and treat incentives as a bonus that either shows up or does not.
If you signed a 2026 contract that shows a federal tax credit as a deduction from your price, contact the contractor in writing and ask them to correct it. Depending on how it was presented, a quoted incentive that does not exist may be a misrepresentation under California’s home improvement contract rules. The Contractors State License Board handles complaints, and every legitimate contractor’s license number — mine is CA Lic. #1070401 — can be verified on the CSLB site in about thirty seconds. Do that before you hire anybody, for any job.
No. Section 25C, the Energy Efficient Home Improvement Credit, expired for property placed in service after December 31, 2025 under the One Big Beautiful Bill Act signed July 4, 2025. Section 25D, the Residential Clean Energy Credit, was terminated on the same timeline. Systems installed in 2026 do not qualify for either.
No. The credit is based on when the property is placed in service, meaning the installation is complete and the system is operational. Purchase date, deposit date and delivery date do not matter. A system commissioned in January 2026 is outside the window.
Southern California Edison rebates are the most dependable option, with published 2026 amounts around $3,000 for ducted heat pumps and $2,500 for ductless systems, plus smart thermostat incentives. South Coast AQMD GO ZERO adds $1,000 to $3,000 per heat pump when the pilot is open, and income-qualified households should look at SCE Energy Savings Assistance first.
Not for new single-family reservations. TECH Clean California single-family heat pump incentives went fully reserved on November 14, 2025, and HEEHRA single-family rebates were fully reserved statewide as of February 24, 2026, with later submissions going onto a waitlist. Some multifamily pathways reopened in 2026.
Ask them to remove the line and requote in writing, then look hard at the rest of the proposal. Quoting an expired credit in 2026 means either their pricing material is a year out of date or they are inflating the perceived discount. Neither is a good sign.
Commercial property is handled through depreciation and expensing provisions rather than the residential credits, and qualifying HVAC property on nonresidential buildings is commonly addressed under Section 179. Talk to a CPA about your specific situation. I am an HVAC contractor, not a tax advisor.
SoCal AC Guy quotes real prices with current incentives only — no expired credits used to make a number look smaller. Temecula based, C-20 licensed, CA Lic. #1070401.
Core service area: Temecula, Murrieta, and Menifee.
Also serving: Wildomar, Lake Elsinore, Winchester, Sun City, Canyon Lake, French Valley, Hemet, San Jacinto, Perris, Moreno Valley, Riverside, Corona, Norco, Eastvale, Banning, Beaumont, Calimesa, Cherry Valley, Yucaipa, Idyllwild, Fallbrook, Rainbow, La Cresta, De Luz, Aguanga, and Anza.
Current programs, verified status, itemized scope. Call Jorge and get numbers you can actually plan around.
Call (951) 513-8476
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SoCal AC Guy — Jorge and crew. C-20 HVAC Contractor, CA Lic. #1070401. Based in Temecula, CA. 10+ years serving the Inland Empire.
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