The IRS updated the rules for claiming the residential HVAC energy efficiency tax credit — and the change is small but consequential. If you are an HVAC contractor and you are not giving your customers the right documentation when you complete a qualifying installation, you are costing them money. And in today's market, that kind of oversight costs you referrals.

The 25C energy efficient home improvement credit is one of the most powerful selling tools available to HVAC contractors right now. Homeowners can claim up to $600 for qualifying central air conditioning equipment, up to $2,000 for qualifying heat pumps, and up to $150 for a home energy audit in the same tax year. But the IRS has added a new requirement that contractors need to understand and act on.

What Is the 25C Tax Credit?

The 25C Nonbusiness Energy Property Credit, expanded under the Inflation Reduction Act, allows homeowners to claim a tax credit of 30% of the cost of qualifying energy efficiency improvements, up to annual limits. For HVAC specifically:

• Central air conditioners meeting ENERGY STAR Most Efficient criteria: up to $600

• Heat pumps meeting ENERGY STAR requirements: up to $2,000

• Heat pump water heaters: up to $2,000 (combined with heat pumps, capped at $2,000 total)

• Biomass stoves and boilers: up to $2,000

The credit is non-refundable, meaning it reduces the homeowner's tax liability but does not generate a refund if it exceeds taxes owed. It resets annually, so homeowners can claim it in multiple years for different improvements.

The 25C energy efficient home improvement credit allows homeowners to claim 30% of qualifying HVAC installation costs — up to $2,000 for heat pumps and $600 for central air conditioners — as a federal tax credit on their annual return.

What Changed in 2026: The 4-Digit Code Requirement

The IRS has updated the process for claiming the 25C credit by requiring that taxpayers include a specific product identification code when filing. This code — a 4-digit Qualified Product Identification (QPI) code — identifies the specific qualifying product installed.

The QPI codes are maintained by the Consortium for Energy Efficiency (CEE) and are available through the manufacturer of the qualifying equipment. The IRS is now matching these codes against CEE's database during tax return processing to verify that the equipment claimed actually meets the efficiency thresholds required for the credit.

What this means in practice: if your customer files for the 25C credit and cannot provide the correct 4-digit code for the equipment you installed, their credit claim may be delayed, questioned, or denied. That is a problem they will remember — and a problem they will associate with the contractor who did the installation.

How to Get the Code and Give It to Your Customers

The process is straightforward once you know what to look for:

• Check the manufacturer's website or product literature for the QPI code associated with the specific model you installed. Major manufacturers including Carrier, Trane, Lennox, Rheem, and Daikin maintain these codes in their product databases.

• Include the QPI code on your installation paperwork, invoice, or completion certificate. The homeowner needs this document to file their tax credit claim.

• Keep a record of the code in your job file. If a customer comes back with questions about their tax filing, you want to be able to provide the information quickly.

• Make the tax credit part of your sales conversation. When presenting a quote for qualifying equipment, include the potential tax credit as a line item showing the effective cost after credit. This is a legitimate selling tool that many contractors underuse.

How Contractors Can Stay Compliant

The simplest compliance approach is to add the QPI code documentation to your standard installation workflow. Build it into your job completion checklist: before you close out a job involving qualifying equipment, pull the QPI code and include it in the customer paperwork.

If you work with a CRM or field service management platform, add a custom field for QPI codes so the information is captured and retrievable. Some HVAC software platforms are beginning to include QPI code databases — check with your software provider.

The IRS has also published updated guidance on Form 5695, which is the form homeowners use to claim the credit. Familiarising yourself with this form will help you better advise customers on what they need to file successfully.

Frequently Asked Questions

What is the 25C HVAC tax credit?

The 25C credit is a federal tax credit allowing homeowners to claim 30% of the cost of qualifying energy efficient HVAC installations, up to $2,000 for heat pumps and $600 for central air conditioning systems that meet ENERGY STAR Most Efficient criteria.

What is the IRS 4-digit code for HVAC tax credits?

The IRS now requires homeowners claiming the 25C credit to include a Qualified Product Identification (QPI) code — a 4-digit number assigned to qualifying products by the Consortium for Energy Efficiency. This code is available from the equipment manufacturer.

Do HVAC contractors need to provide tax credit documentation?

While contractors are not legally required to file tax credit claims on behalf of customers, providing the QPI code and installation documentation helps customers file successfully. Contractors who do this create goodwill and avoid customer service problems when tax season arrives.

Which HVAC equipment qualifies for the 25C tax credit in 2026?

Qualifying equipment includes heat pumps meeting ENERGY STAR requirements (up to $2,000 credit), central air conditioners meeting ENERGY STAR Most Efficient criteria (up to $600), and heat pump water heaters. Eligibility requirements are updated annually — verify with the manufacturer or at energystar.gov.