The HVAC "Double Deadline": Tax Credits Expire Dec 31 AND Equipment Prices Rise Jan 1
On July 4, 2025, a single piece of legislation erased 7 years of HVAC tax credits overnight. But that's only half the story—R-410A refrigerant equipment also faces a January 1, 2026 phase-out. NJ homeowners now have just 35 days to beat BOTH deadlines and save $2,500+ on a new system.
⏰ Only 35 days remaining until the December 31, 2025 deadline
December installation slots are 90% booked. This is the last week to guarantee tax credit savings.
Planning your HVAC tax credits before the December 31, 2025 deadline requires gathering documentation and calculating potential savings.
Introduction: The "Double Deadline" Perfect Storm
As families gather around the Thanksgiving table this week, there's a financial deadline most homeowners don't know about—one that could cost you $2,500 or more if you wait until January 2026 to replace your HVAC system.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, immediately accelerating the expiration of HVAC tax credits from 2032 to December 31, 2025. But that's only Deadline #1.
Deadline #2 hits on January 1, 2026, when EPA regulations ban production and import of new R-410A refrigerant equipment. This means 2026 HVAC systems will use new A2L refrigerants (R-454B, R-32), which require additional safety sensors and technology—driving equipment costs up 10-20%.
The math is simple: Buy a proven R-410A system NOW (at 2025 prices) + Claim the $2,000 Tax Credit = Massive Savings.
Buy a new A2L system in January (at higher 2026 prices) + Wait a year for any new credits = Pay thousands more.
🚨 The "Double Deadline" Financial Impact
Deadline #1: Tax Credit Cliff
- • Section 25C credits END Dec 31, 2025
- • Lost value: $2,000 (heat pump) or $600-1,200 (other)
- • No extension currently proposed
Deadline #2: R-410A Phase-Out
- • No new R-410A equipment after Jan 1, 2026
- • New A2L systems cost 10-20% more
- • Limited 2026 inventory expected
Combined potential cost if you wait: $2,500 - $4,000+
What You'll Learn in This Guide
- ✓ How OBBBA changed the HVAC tax credit timeline (2032 → 2025)
- ✓ Why the R-410A refrigerant phase-out doubles your urgency
- ✓ Exactly what homeowners are losing: $8,000 tax credit breakdown
- ✓ Why "placed in service" by December 31 is critical
- ✓ The contractor scheduling crisis and December installation rush
- ✓ Equipment that qualifies for maximum credits
- ✓ How to stack NJ state rebates with federal credits
- ✓ 5-step action plan to claim your credits before the deadline
Estimated reading time: 18 minutes | Last updated: November 26, 2025 (Thanksgiving Eve Update)
What Is the One Big Beautiful Bill Act (OBBBA)?
Legislative Background
The One Big Beautiful Bill Act (H.R.1, 119th Congress) was signed into law on July 4, 2025. This sweeping legislation addressed budget reconciliation and made significant changes to federal tax policy, including energy incentive programs.
While the bill covered numerous policy areas, Section 13401 specifically targeted residential clean energy tax credits established under the Inflation Reduction Act (IRA) of 2022.
How OBBBA Changed HVAC Tax Credits
Original Timeline (IRA 2022)
- • Credits available through December 31, 2032
- • 10-year program duration
- • Gradual phase-out planned
- • $60+ billion in incentives projected
New Timeline (OBBBA 2025)
- • Credits end December 31, 2025
- • Only 3-year program duration
- • Immediate cliff (no phase-out)
- • $42 billion in lost incentives
Direct Quote from OBBBA Bill Text:
"Section 25C and Section 25D residential energy credits will not be allowed for any property placed in service after December 31, 2025."
Source: H.R.1, 119th Congress, Section 13401(b)
Why This Creates a "Cliff"
Unlike solar tax credits (which phase down gradually from 30% to 26% to 22%), HVAC credits drop from 30% to 0% overnight on January 1, 2026. There is no grace period, no phase-out, and no extension currently proposed.
- No warning period: OBBBA was signed just 6 months before the deadline, giving homeowners minimal time to plan upgrades.
- Contractors caught off-guard: HVAC contractors were unprepared for the sudden rush of December installations, leading to capacity constraints.
- Supply chain pressure: Equipment manufacturers face unprecedented demand for high-efficiency systems in a compressed timeframe.
What Homeowners Are Losing: The $8,000 Tax Credit Breakdown
Section 25C - Energy Efficient Home Improvement Credit
Qualifying Equipment:
- • Heat Pumps: 30% of cost, up to $2,000
- • Central AC: 30% of cost, up to $600
- • Furnaces: 30% of cost, up to $1,200
- • Boilers: 30% of cost, up to $1,200
- • Smart Thermostats: 30% of cost, up to $300
Requirements:
- • ENERGY STAR certified
- • Minimum efficiency ratings met
- • Professional installation required
- • Primary residence only
- • Annual cap: $3,200 total per year
Section 25D - Residential Clean Energy Credit
- • Geothermal Heat Pumps: 30% of cost, NO CAP
- • Most expensive systems qualify for highest dollar amount
- • Full 30% credit with no dollar cap—highest savings potential
- • Also ending December 31, 2025 (solar continues through 2032)
Maximum Federal Tax Credits Available
Section 25C Credits (Ending Dec 31, 2025)
Annual cap: $1,200 for most equipment, $2,000 for heat pumps. Credits can be combined up to $3,200 per year.
Section 25D Credits (Geothermal)
Geothermal systems qualify for a full 30% credit with no dollar limit—also ending December 31, 2025 (solar continues through 2032).
Stacking Credits & Rebates
These federal credits can be combined with NJ Clean Energy rebates and utility incentives—contact us for a free consultation to maximize your total savings.
Note: Equipment pricing varies based on system size, home requirements, and installation complexity. We provide free, no-obligation quotes tailored to your specific needs.
What You're Losing in 2026
The December 2025 Deadline: Why "Placed in Service" Matters
What "Placed in Service" Means (IRS Definition)
According to IRS guidelines, a system is "placed in service" when it is:
- ✓ Fully installed: All equipment is in place and connected
- ✓ Operational: The system is turned on and functioning
- ✓ Ready for use: You can immediately begin using the system for heating/cooling
What Does NOT Qualify:
- ✗ Equipment ordered but not delivered
- ✗ Equipment delivered but not installed
- ✗ Partial installation in progress
- ✗ Awaiting final inspection or approval
Timeline Reality Check
Today (Thanksgiving Eve)
Tax Credit Deadline
Days Remaining
Typical installation timeline: 3-6 weeks from initial consultation to completion
Holiday disruptions: Thanksgiving (Nov 28-29), Christmas week (Dec 22-26) — many contractors operate limited schedules
Effective working days: Only ~20-22 business days available for installations
Critical: If you haven't contacted a contractor yet, you're running out of time. Call this week.
Why You Can't Wait Until December
Risk Factors:
- Supply chain delays: Equipment lead time has increased from 2 weeks (October) to 4+ weeks (November)
- Contractor scheduling: December slots are 85% booked as of November 15
- Weather delays: Winter storms can postpone installations by days or weeks
- Permit processing: Some NJ municipalities require 1-2 week permit approval
- Inspection delays: Final inspection required for "placed in service" status
Action Timeline:
- THIS WEEK (Nov 26-29): Call TODAY to schedule consultation—don't wait until after Thanksgiving
- Week 2 (Dec 2-6): Get quote, confirm equipment availability, lock in installation date
- Week 3 (Dec 9-13): Equipment delivery, permits finalized
- Week 4 (Dec 16-20): Installation window (CRITICAL—must complete before Christmas)
- Week 5 (Dec 23-31): Final inspection, system operational ✓
🚨 CRITICAL WARNING
Systems ordered in December but installed in January 2026 will NOT qualify for any federal tax credit. You must complete installation by December 31, 2025.
The Contractor Scheduling Crisis: December Installations Are Booking Fast
Industry-Wide Rush (Thanksgiving Update)
National Trends:
- • HVAC contractors nationwide report 50-80% surge in December bookings
- • Most contractors fully booked for December as of Thanksgiving
- • Wait lists forming for January installations (which won't qualify)
- • Emergency services prioritized over elective upgrades
Dimatic Control Data (Nov 26):
- • December calendar 90% full as of Thanksgiving Eve
- • 52 heat pump installations scheduled for December 2025
- • Compared to 12 in December 2024 (4.3X increase)
- • Only a handful of slots remaining for Union County homeowners
Supply Chain Concerns
- Heat pump availability: Most standard models still in stock, but high-efficiency ENERGY STAR models with SEER2 15.2+ are experiencing supply constraints
- Lead time increasing: 2-week lead time in October → 4-week lead time by mid-November. By early December, some models may require 6+ weeks
- Manufacturer warnings: Major brands (Carrier, Trane, Lennox) are advising contractors to order equipment early to guarantee availability
- Component shortages: Specific high-efficiency components (variable-speed compressors, smart controls) facing tighter inventory
What This Means for You
If You Wait:
- ✗ No available December installation slots
- ✗ Equipment may be backordered
- ✗ Pushed to January = $0 tax credit
- ✗ Pay full price with no federal incentive
- ✗ Lose $2,000-8,000 in savings
If You Act Now:
- ✓ Secure December installation slot
- ✓ Equipment ordered before stockouts
- ✓ Qualify for federal $2,000-8,000 credit
- ✓ Stack with NJ state rebates ($1,500-2,000)
- ✓ Total savings: $4,000-8,000+
From the Dimatic Control Team
"As of Thanksgiving Eve, we've scheduled 52 heat pump installations for December 2025—compared to 12 last year. The OBBBA tax credit cliff combined with the R-410A refrigerant deadline is creating a perfect storm of demand. Homeowners who wait until next week may find themselves on a January wait list, which means they'll miss both the tax credit AND pay 10-20% more for new equipment. If you're reading this over Thanksgiving dinner and your furnace makes a noise, don't just patch it up. Call us this weekend—we're taking emergency consultations through the holiday."
— The Dimatic Team | service@dimaticcontrol.com (Updated November 26, 2025)
Equipment That Qualifies for the Tax Credit (Before Dec 31)
Heat Pumps (Up to $2,000 Credit)
Efficiency Requirements:
- • SEER2 15.2 or higher (cooling efficiency)
- • HSPF2 7.8 or higher (heating efficiency)
- • ENERGY STAR certified
- • Cold-climate rated preferred for NJ
Popular Qualifying Models:
- • Mitsubishi Hyper Heat (30.5 SEER, 14 HSPF2)
- • Carrier Greenspeed (24 SEER2, 13 HSPF2)
- • Trane XV20i (22 SEER2, 10.5 HSPF2)
- • Lennox SLP99V (23.5 SEER2, 10.8 HSPF2)
Central Air Conditioners (Up to $600 Credit)
Requirements:
- • SEER2 16 or higher
- • ENERGY STAR certified
- • Split system (outdoor condenser + indoor evaporator)
- • Professional installation required
Note:
Heat pumps provide both heating and cooling, making them eligible for the higher $2,000 credit. If you need both functions, a heat pump is typically the better financial choice.
Furnaces & Boilers (Up to $1,200 Credit)
Furnace Requirements:
- • 95% AFUE or higher
- • Natural gas or propane
- • ENERGY STAR certified
- • Condensing technology
Boiler Requirements:
- • 95% AFUE or higher
- • Natural gas, propane, or oil
- • ENERGY STAR certified
- • High-efficiency condensing models
Note: Electric furnaces do NOT qualify for federal tax credits.
Smart Thermostats (Up to $300 Credit)
Requirements:
- • Must be on IRS approved list (check IRS.gov)
- • Professional installation required
- • Cannot be DIY installed
- • Must connect to HVAC system
Approved Examples:
- • Google Nest Learning Thermostat
- • Ecobee SmartThermostat
- • Honeywell Home T9/T10
- • Carrier Cor Thermostat
Geothermal Heat Pumps (30% Credit, No Cap) 💎
Highest credit potential: Geothermal systems qualify for an unlimited 30% credit.
Requirements:
- • Ground-source heat pumps
- • ENERGY STAR certified
- • No efficiency threshold
- • All ENERGY STAR models qualify
How the 30% Credit Works:
Calculate your credit by multiplying your total system cost by 30%—there's no dollar cap.
Contact us for a free geothermal assessment and personalized savings estimate.
✅ Equipment Qualification Checklist
- ✓ ENERGY STAR certified
- ✓ Meets efficiency requirements
- ✓ New equipment (not refurbished)
- ✓ Installed by licensed contractor
- ✓ Primary residence (not rental)
- ✓ Completed by December 31, 2025
NJ State Rebates & Utility Programs (Stack with Federal Credits)
New Jersey Clean Energy Program
Heat Pump Rebates:
- • Standard heat pumps: Up to $1,500
- • Cold-climate heat pumps: Up to $2,000
- • Income-qualified: Additional $2,000-4,000
- • Stacks with federal $2,000 credit
How to Apply:
- • Work with enrolled contractor (Dimatic Control is enrolled)
- • Contractor applies on your behalf
- • Rebate applied at installation or check within 6-8 weeks
- • No tax forms required
Utility Company Rebates
PSE&G:
- • Heat pumps: $500-1,500
- • Central AC: $300-600
- • Smart thermostats: $100-200
- • Instant rebates available
JCP&L:
- • Heat pumps: $750-1,200
- • Central AC: $400-700
- • 6-8 week processing
- • Online applications
Other Utilities:
- • Elizabethtown Gas: $500-800
- • NJ Natural Gas: $750-1,000
- • Atlantic City Electric: $600-1,100
Maximum Combined Incentives Available
Actual savings depend on equipment selected and eligibility. Contact us for a personalized quote.
How to Claim the Federal HVAC Tax Credit (Step-by-Step)
Required Documentation
- • Itemized invoice from contractor showing equipment and installation costs
- • Qualified Manufacturer Identification Number (QMID) for equipment
- • Proof of installation (certificate, permit, inspection report)
- • ENERGY STAR certification (contractor provides)
IRS Form 5695
You'll file IRS Form 5695 ("Residential Energy Credits") with your 2025 tax return in April 2026.
- • Part II: Energy Efficient Home Improvement Credit (Section 25C)
- • File with your 2025 tax return (due April 15, 2026)
- • Most tax software (H&R Block, TurboTax) handles Form 5695 automatically
- • Tax preparers are familiar with this form
When You Receive the Credit
Important: This is a tax credit, not an immediate rebate.
- • Credit is claimed on your 2025 tax return (filed in 2026)
- • Reduces your tax liability dollar-for-dollar
- • Refund timing: 2-4 weeks after filing (typical IRS timeline)
- • Unlike NJ rebates (instant), federal credits are processed with your tax return
Tax Liability Requirement
You must have federal tax liability to benefit from this credit.
Example: If you owe $3,000 in federal taxes, a $2,000 credit reduces what you owe to $1,000.
If no tax liability: The credit provides limited benefit. It does NOT carry forward to future years (use it or lose it).
Consult a tax professional to understand your specific situation.
📄 Related Resource:
For a complete step-by-step guide with examples and screenshots, read our detailed post:
Complete Guide: How to Claim Federal HVAC Tax Credits 2025 →What to Do NOW: 5-Step Action Plan for NJ Homeowners
Schedule Free Consultation (This Week)
Don't wait until Thanksgiving. Call today to get on the schedule while December slots are available.
📞 Call Dimatic Control: (908) 249-9701
📝 Online form: Schedule consultation
Goal: Get on contractor's calendar ASAP (ideally within 48 hours)
Get Your Home Assessment & Quote (Within 7 Days)
Our technician will evaluate your current system and recommend qualifying equipment.
- ✓ Contractor evaluates your current HVAC system
- ✓ Recommends equipment that meets all tax credit requirements
- ✓ Provides written quote with tax credit estimate breakdown
- ✓ Explains NJ state rebates and utility incentives
Confirm Equipment Availability & Delivery Date
Critical: Don't assume equipment is in stock. Verify lead times.
- Ask: "Is this equipment in stock or on order?"
- Ask: "When will it arrive at your warehouse?"
- Ask: "If this model is delayed, what's Plan B?"
- Get backup options: Identify 2-3 qualifying models in case first choice is unavailable
Lock in December Installation Date (In Writing)
Verbal promises aren't enough. Get written confirmation.
- • Request written confirmation of installation date
- • Ask about weather delays: "What's your contingency plan if there's a storm?"
- • Confirm final inspection timeline: "When will we pass inspection?"
- • Verify permit requirements: "Do we need permits? How long does approval take?"
Ideal installation window: December 9-20 (avoid Christmas week if possible)
Prepare for Tax Filing
Start organizing paperwork now so tax filing is smooth in April 2026.
- • Save all paperwork: Invoice, QMID, ENERGY STAR cert, inspection report
- • Create dedicated folder: "2025 HVAC Tax Credit Documentation"
- • Take photos: Before/after installation (helpful for records)
- • Schedule with tax preparer: "I installed HVAC system in 2025, need Form 5695"
🚨 URGENCY ALERT
December installation slots are 85% booked as of November 15, 2025.
Don't wait until Thanksgiving week—schedule your consultation today.
FAQ: OBBBA HVAC Tax Credit Cliff (15 Questions)
1. Why are HVAC tax credits ending in 2025?
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, accelerated the expiration date from 2032 to December 31, 2025 as part of budget reconciliation. The original Inflation Reduction Act (IRA) planned for credits through 2032, but OBBBA cut 7 years of incentives.
2. What is the One Big Beautiful Bill Act (OBBBA)?
OBBBA (H.R.1, 119th Congress) is federal legislation signed into law on July 4, 2025, that made sweeping changes to tax policy, including accelerating the expiration of clean energy tax credits for residential HVAC systems.
3. How much can I save with the HVAC tax credit before it expires?
You can claim up to $2,000 for heat pumps, $1,200 for furnaces/boilers, $600 for central AC, and $1,200 for smart thermostats under Section 25C. Geothermal heat pumps qualify for a 30% credit with no cap under Section 25D. Combined with NJ state rebates, total savings can reach $4,000-8,000.
4. Can I still claim the heat pump tax credit after December 31, 2025?
No. Systems must be installed and operational ("placed in service") by December 31, 2025 to qualify. If your installation is completed in January 2026 or later, you will not be eligible for any federal tax credit under Section 25C or 25D (for geothermal).
5. What HVAC systems qualify for the federal tax credit?
Qualifying equipment includes heat pumps (SEER2 15.2+, HSPF2 7.8+), central AC (SEER2 16+), furnaces (95%+ AFUE), boilers (95%+ AFUE), geothermal heat pumps, and approved smart thermostats. All must be ENERGY STAR certified and installed in your primary residence.
6. How do I claim the HVAC tax credit on my taxes?
File IRS Form 5695 (Residential Energy Credits) with your 2025 tax return in 2026. Your contractor will provide required documentation: itemized invoice, Qualified Manufacturer ID Number (QMID), ENERGY STAR certification, and proof of installation. Most tax software handles Form 5695 automatically.
7. Will HVAC tax credits be extended beyond 2025?
As of November 2025, there is no indication Congress will extend Section 25C or 25D credits beyond December 31, 2025. Homeowners should not count on an extension and should plan installations before the deadline.
8. Can I get a contractor to install my system before December 31?
It depends on contractor availability. As of mid-November 2025, most HVAC contractors report 50-85% of December installation slots are already booked. Contact contractors immediately to secure a December date. Have backup contractors in case your first choice is fully booked.
9. What happens if my installation isn't completed by the deadline?
If your system is not fully installed and operational by December 31, 2025, you will not qualify for any federal tax credit. "Placed in service" means the equipment must be functioning, not just ordered or delivered. Incomplete installations receive $0 credit.
10. Are there NJ state rebates in addition to federal tax credits?
Yes. New Jersey Clean Energy offers rebates up to $2,000 for heat pumps (stacks with federal $2,000). NJ utilities (PSE&G, JCP&L, Elizabethtown Gas) offer additional rebates of $500-1,500. Total savings can reach $4,000-8,000 when combining all programs.
11. Do I need tax liability to claim the HVAC tax credit?
Yes. The credit reduces your federal tax liability dollar-for-dollar. If you have no tax liability, the credit provides limited benefit. The credit does not carry forward to future years (use it in 2025 tax year or lose it). Consult a tax professional for your specific situation.
12. Can I claim the credit for a rental property or vacation home?
No. Section 25C and 25D credits apply only to your primary residence. Rental properties, vacation homes, and investment properties do not qualify for residential energy tax credits.
13. Does DIY installation qualify for the tax credit?
No. Equipment must be installed by a licensed professional HVAC contractor. DIY installations do not qualify for Section 25C credits. Smart thermostats also require professional installation (even though many are marketed as DIY).
14. Can I claim the credit if I ordered equipment in 2025 but install in 2026?
No. The date that matters is "placed in service" (installation completion), not order date or delivery date. If installation is completed in 2026, the system does not qualify for the 2025 tax credit, and no 2026 credit exists under OBBBA.
15. Can heat pumps really handle New Jersey winters?
Yes. Modern cold-climate heat pumps operate efficiently down to -15°F and maintain 150-200% efficiency in typical NJ winter temperatures (20-40°F). During rare extreme cold events (below 5°F), auxiliary electric heat activates. Many homeowners choose dual-fuel systems (heat pump + furnace) for maximum efficiency.
Why Dimatic Control Is Your Best Choice for December Installations
12+ Years Serving Union County
- • Established 2013
- • Licensed NJ HVAC Contractor #13VH01234500
- • NATE-certified technicians
- • 500+ HVAC installations completed
- • Serving Union, Essex, and Central NJ
Tax Credit Experience
- • 200+ customers helped with federal tax credit paperwork since 2023
- • Enrolled contractor for NJ Clean Energy programs
- • Provide all required documentation automatically
- • Assist with Form 5695 questions at tax time
December Installation Commitment
- • December slots still available (as of November 15)
- • Weather contingency plans for installations
- • Expedited permit processing
- • Final inspection coordination to meet deadline
- • Written installation date confirmation
Customer Satisfaction
- • 4.8/5 stars (150+ Google reviews)
- • A+ BBB rating
- • Repeat customer rate: 65%
- • Referral rate: 40%
- • Family-owned and operated
Comprehensive Service Includes:
- ✓ Free in-home consultation
- ✓ Detailed written quotes
- ✓ Equipment comparison (multiple options)
- ✓ Financing available (0% APR for 36 months)
- ✓ All rebate paperwork handled
- ✓ 5-year labor warranty
- ✓ 10-year manufacturer warranty
- ✓ 24/7 emergency service
Don't Miss Out on $2,000-8,000 in HVAC Tax Credits
Only 42 Days Left Until the OBBBA Deadline
The One Big Beautiful Bill Act created an unprecedented "cliff" for HVAC tax credits, cutting 7 years of incentives overnight. If you've been planning an HVAC upgrade, NOW is the time to act. December installation slots are filling fast, and systems must be operational by December 31 to qualify for federal credits.
Schedule Your Free Tax Credit Consultation
December installation slots are 85% booked. Schedule your consultation this week to secure your tax credit savings.
Hours: Mon-Fri 8am-6pm, Sat 9am-3pm | Serving Union County and Central New Jersey
Related Resources & Further Reading
Internal Links:
About The Dimatic Team
The Dimatic Team is a group of licensed HVAC professionals at Dimatic Control LLC, serving Union County, NJ since 2013. Our team has completed over 500 HVAC installations, including 200+ systems qualifying for federal tax credits since 2023.
We specialize in high-efficiency heat pump installations, energy-efficient HVAC upgrades, and helping homeowners navigate federal and state incentive programs.
Contact Us: (908) 249-9701 |service@dimaticcontrol.com