Central air conditioners installed by December 31, 2025 qualify for a federal tax credit of up to $600 (30% of costs). It goes on Form 5695 Line 22.
Credit Expired December 31, 2025
The 25C Energy Efficient Home Improvement Credit expired on December 31, 2025 due to the "One Big Beautiful Bill" (Public Law 119-21). If you installed a qualifying central AC by that date, you can still claim the credit on your 2025 tax return. (IRS FAQ on Public Law 119-21)
Quick Summary
- Central AC credit: 30% of costs, max $600
- Must meet Energy Star Most Efficient or CEE Highest Tier
- Report on Form 5695 Line 22 with manufacturer's QMID
- Different from heat pumps (Line 29a, $2,000 cap)
- Part of $1,200 annual cap shared with other improvements
Credit Amount
The credit is 30% of your total installation costs, including equipment and labor. The maximum credit is $600 per year.
Example calculations:
- $3,000 AC installation: 30% = $900, but capped at $600
- $1,500 AC installation: 30% = $450
- $500 AC installation: 30% = $150
Tax Credit Calculator
This calculator provides an estimate. Your actual credit may vary based on your tax situation. The credit is non-refundable and cannot exceed your tax liability.
This is significantly less than the heat pump credit ($2,000 cap) because heat pumps both heat and cool your home, while central ACs only cool.
HVAC Equipment Credit Comparison
| Equipment | Credit Limit | Notes |
|---|---|---|
| Heat Pumps (electric) | $2,000 | Heats + cools, Line 29a |
| Central Air Conditioners | $600 | Cooling only, Line 22 |
| Gas/Oil/Propane Furnaces | $600 | Heating only, Line 24 |
| Boilers | $600 | Heating only, Line 24 |
Heat pumps get the higher credit because they replace both heating and cooling equipment.
What's a Central Air Conditioner?
A central air conditioner is a cooling system with:
- Outdoor condensing unit
- Indoor evaporator coil (typically in furnace or air handler)
- Ductwork throughout your home
Not included: Window units, portable ACs, mini-splits, ductless systems. The credit is specifically for ducted central air systems.
Note
If you're considering a mini-split system, check if it qualifies as an air-source heat pump instead. Many mini-splits provide both heating and cooling and may qualify for the higher $2,000 heat pump credit (Line 29a).
Efficiency Requirements
Not every central AC qualifies. Your system must meet strict efficiency standards.
Energy Star Most Efficient Required
Central air conditioners must meet Energy Star Most Efficient criteria OR be on the CEE (Consortium for Energy Efficiency) Highest Tier list.
Minimum efficiency ratings (effective Jan 1, 2023):
- SEER2 ≥ 16 (Seasonal Energy Efficiency Ratio 2)
- EER2 ≥ 11 (Energy Efficiency Ratio 2)
These ratings appear on your equipment's AHRI certificate. Manufacturers that meet these standards are listed in the ENERGY STAR Most Efficient database and the CEE Highest Tier directory.
Warning
Standard Energy Star certification is not enough. Your AC must meet Energy Star Most Efficient standards, which are higher than basic Energy Star requirements.
Heat Pumps vs Central Air Conditioners
Many people confuse these two systems. The key difference matters for your tax credit.
Central Air Conditioner (Line 22, $600 max):
- Cools only
- Requires separate heating system (furnace, boiler, etc.)
- Lower efficiency in mild climates
Heat Pump (Line 29a, $2,000 max):
- Heats AND cools
- Replaces both AC and furnace
- More efficient, higher credit
If you're replacing an old AC, consider a heat pump instead. You'll get a much higher credit ($2,000 vs $600) and eliminate your heating equipment.
What Costs Are Covered?
Yes, included in the credit
- Central AC equipment (condensing unit + evaporator coil)
- Installation labor
- Required electrical work for the AC (also eligible for Line 25 credit, see below)
- Refrigerant and startup costs
No, not covered
- Ductwork installation or modifications
- Thermostat upgrades (unless installed with qualifying equipment)
- Extended warranties
- Maintenance agreements
- Cosmetic work
Labor is a big part of AC installations, often 30-40% of the total cost. Unlike some rebate programs, the 25C credit includes what you paid for installation.
Electrical Panel Upgrades
Claim Extra $600 for Electrical Work
If your contractor upgraded your electrical panel, added circuits, or installed new feeders to support your central AC, you can claim an additional credit of up to $600 on Form 5695 Line 25. This is separate from your $600 AC credit.
Report electrical improvements on Line 25 with code D (central air conditioner). This "enabling property" credit covers:
- Electrical panel upgrades or replacements
- New circuit breakers
- Dedicated circuits for the AC
- Feeder line installation
Example: You paid $5,000 for a central AC and $1,200 for an electrical panel upgrade.
- Line 22: Central AC credit = $600 (30% of $5,000, capped at $600)
- Line 25: Electrical credit = $360 (30% of $1,200)
- Total credit: $960
Annual Limits and Caps
The $600 central AC credit is part of a combined annual limit.
Structure:
- Lines 22-26 (AC, water heaters, furnaces, electrical, audits): Combined $1,200 max
- Line 29 (heat pumps, HPWH): Separate $2,000 max
- Total possible: $3,200 per year
If you install a central AC ($600), electrical panel ($600), and new windows ($600) in the same year, you'd calculate:
- AC: $600
- Electrical: $600
- Windows: $600
- Total: $1,800, but capped at $1,200 for Lines 18-27
Plan accordingly. You might spread improvements across multiple years to maximize credits.
Note
The credit reset annually from 2023-2025. Since the credit expired December 31, 2025, installations after that date do not qualify.
How to Claim the Credit (Line 22)
You report your central AC on Form 5695 Part II, Section B, Line 22.
Gather Documentation
- Invoice showing equipment model, installation date, and total cost
- AHRI certificate confirming SEER2 ≥ 16 and EER2 ≥ 11
- Manufacturer's QMID code (find yours in our directory)
- Electrical invoice (if panel/circuit work was done)
Complete Form 5695 Line 22
- Line 22a: Enter manufacturer's QMID and cost of most expensive central AC
- Line 22b: If you installed additional central ACs, enter their combined cost
- Line 22c: Total AC costs (22a + 22b)
- Line 22d: Multiply by 30%, max $600
Complete Line 25 (if applicable)
- If electrical work was done:
- Line 25a: Answer "Yes"
- Line 25b: Enter code D (central air conditioner)
- Line 25c: Enter electrical costs
- Line 25d: Enter AC manufacturer's QMID
- Line 25e: Multiply by 30%, max $600
Calculate Total Credit
- Form 5695 combines all credits and transfers to Schedule 3, line 5b
- This reduces your tax liability dollar-for-dollar
The QMID is a 4-character alphanumeric code that identifies your equipment manufacturer. Enter it exactly as shown in the IRS database or our directory.
Getting Your QMID
Starting with the 2025 tax year, you need your manufacturer's QMID to claim the credit. This 4-character code is an IRS registration — it won't be on your invoice or your equipment.
Search our QMID directory by brand name. If your brand isn't there, call the manufacturer and ask for their QMID. Enter the exact 4-character code on Form 5695 Line 22a.
Stacking With Rebates
Combine Federal and Local Incentives
The 25C tax credit stacks with most utility and state rebates. Apply utility rebates first, then calculate your 25C credit on the remaining costs.
Example calculation:
- Total installation cost: $4,000
- Utility rebate received: -$500
- Your out-of-pocket cost: $3,500
- 25C credit (30% of $3,500): $1,050
- Final credit (capped): $600
Rebates from manufacturers or retailers also reduce your basis. Always subtract rebates before calculating the federal credit.
Income Limits
Good News
There are no income restrictions. Whether you make $30,000 or $3 million, you qualify for the same credit.
However, the 25C credit is non-refundable. It can only reduce your tax liability to zero, not generate a refund.
Example: You owe $400 in federal taxes and have a $600 AC credit. You'll reduce your taxes to zero, but the remaining $200 credit is lost. It cannot carry forward to future years.
Common Questions
Timeline
Qualifying period: January 1, 2023 through December 31, 2025
The installation date matters, not the purchase date. If you bought the AC in 2025 but installed it in 2026, it does not qualify.
Official Resources
IRS overview of the Energy Efficient Home Improvement Credit
IRS.govSearch qualifying central air conditioners by brand and model
ENERGY STARDownload blank Form 5695 for the current tax year
IRS.govNeed Help?
For complete instructions on filling out Form 5695, including all line items and calculations, see our Form 5695 Guide.
To find your manufacturer's QMID, search our directory by brand name.