The Federal HVAC Tax Credit Is Gone, Replacement Demand Is Stirring, and Refrigerant Rules Get More Complicated

REGULATORY SIGNAL

The federal residential HVAC efficiency credit ended after 2025

The federal Energy Efficient Home Improvement Credit under Section 25C is no longer available for qualifying property placed in service after December 31, 2025.

The former credit covered qualifying residential improvements including certain:

• Central air-conditioning systems
• Heat pumps
• Furnaces
• Boilers
• Other energy-efficiency improvements

The credit ended earlier than the expiration date previously established under federal law.

What it means for contractors: Check your website, proposals, sales materials, email templates, and old scripts.

Anything still promising a federal HVAC tax credit may now be giving customers outdated information.

State, utility, manufacturer, and local incentives may still exist, but those programs should be verified individually.

The replacement conversation may now place even more emphasis on:

• Operating cost
• Comfort
• Reliability
• Expected system life
• Repair history
• Efficiency
• Financing
• Total ownership cost

A federal incentive can disappear overnight.

A clear economic explanation of the homeowner’s choices remains useful regardless of policy.

MARKET SIGNAL

Carrier sees residential HVAC moving back toward replacement

Carrier’s second-quarter results suggest residential replacement demand may be strengthening.

Its North American residential HVAC sales rose 9% in Q2, while light-commercial sales increased 10%.

Residential field inventory was also approximately 25% lower than the previous year.

Carrier indicated that the market appears to be moving away from the unusually repair-heavy environment seen previously and toward more typical replacement behavior.

Affordability and interest rates remain headwinds.

What it means for contractors: Equipment eventually reaches the point where another repair stops making economic sense.

That makes the quality of the replacement conversation increasingly important.

Not pressure.

Clarity.

Show the homeowner:

• What failed
• What the repair costs
• What additional risks remain
• How old the system is
• What replacement changes
• What financing does to the monthly cost

Then let the facts help make the decision.

MANUFACTURER SIGNAL

Commercial HVAC continues to show strength

Lennox and Trane Technologies both reported strong commercial HVAC performance in the second quarter.

Lennox’s Building Climate Solutions revenue rose 24%.

Trane Technologies reported Americas commercial HVAC bookings up 50%, with data-center demand playing a major role in its growth.

That doesn’t mean every residential contractor should suddenly start chasing data-center projects.

But it reinforces a larger industry trend:

Cooling demand is expanding beyond traditional comfort applications.

Data centers, high-density computing, controls, thermal management, electrification, and increasingly sophisticated building systems are creating new HVAC requirements.

The industry is getting broader.

And that creates opportunities not only for manufacturers, but eventually for contractors with the skills and positioning to serve more specialized markets.

REFRIGERANT SIGNAL

Federal R-410A relief doesn’t mean every state follows the same rule

EPA finalized changes in May that removed the federal installation deadline for certain residential and light-commercial air-conditioning and heat-pump systems when the specified components were manufactured domestically or imported into the United States before January 1, 2025.

That allows qualifying legacy inventory to continue being installed under federal rules.

But there’s an important complication:

State requirements can differ.

New York, for example, maintained its own January 1, 2026 installation deadline under state HFC regulations despite the federal change.

What it means for contractors: “EPA changed the rule” may no longer be enough information.

Before assuming equipment can legally be installed, contractors may need to know:

• Federal requirements
• State requirements
• Equipment manufacture or import date
• Refrigerant
• Equipment category
• Installation location

The refrigerant transition is becoming a compliance issue as much as an equipment issue.

BUSINESS SIGNAL

Losing an incentive makes financing more important, not less

When a homeowner loses access to a tax credit, the replacement price doesn’t get smaller.

The affordability gap simply has to be addressed somewhere else.

For many contractors, that makes financing more important to the replacement conversation.

A homeowner looking at a five-figure proposal may understand the decision very differently when shown:

• Repair cost
• versus
• Replacement cost
• versus
• Monthly financing payment

That isn’t about hiding the price.

It’s about explaining the financial decision in terms the customer can actually evaluate.