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It’s possible to save thousands of dollars on an HVAC upgrade in 2025. Whether you’ve already made a purchase or are thinking about a last-minute installation, our team at Service Professor is here to help. We can help you sort through options for federal tax credits, state rebates, and utility provider discounts. Many of these rebates expire at the end of the year, while others are likely to be ongoing. Knowing what’s available can help you make an educated decision that benefits your home and budget.
What Is the Purpose of Tax Incentives?
The HVAC tax incentives that are available in the state of Michigan are usually designed to reduce energy consumption in homes. Signed into law on August 16, 2022, the Inflation Reduction Act (IRA) focuses on clean energy and lowering carbon emissions. Incentives and rebates are part of this plan.
Incentives are also designed to lower your monthly household expenses in addition to reducing your carbon footprint. Since heating and cooling often account for half of what homeowners spend on energy each year, considering an upgrade is advisable. There are many modern units that feature energy-efficient designs and ENERGY STAR ratings.
What Incentives Are Available in 2025?
A substantial incentive, the Energy Efficient Home Improvement Credit is part of the Inflation Reduction Act (IRA) (section 25C). It covers up to 30% of qualifying project costs. However, there is a maximum amount of money that you can receive, depending on the type of HVAC equipment you’re investing in.
Heat pumps qualify for up to a $2,000 credit, while central air conditioners qualify for up to a $600 credit. We can work with you to determine which models will get you the most money back. Certain furnaces and boilers will qualify for up to $600 back if they are ENERGY STAR certified.
Adding insulation and sealing air leaks can help create a tighter home envelope and reduce energy loss. You may be eligible for up to 30% off the total cost of your project, up to $1,200 annually.
These incentives are available when you are filing your federal taxes. You won’t receive the money right away, but you can plan for the return on investment later on.
Michigan-Specific Rebates
Michigan has a Home Energy Rebates (MiHER) program that is funded by the IRA. This program includes the HOMES Program, which focuses on home efficiency rebates. The amount of money you receive will depend on the energy savings that you achieve. For example, the more energy you save, the more money back you yield.
The Home Electrification and Appliance Rebates (HEAR) program offsets the initial cost of electrification when installing a heat pump, water heater, or electric stove. The goal of this program is to make the switch from fossil fuels more affordable. In this instance, you don’t have to wait many months to receive your incentive.
Incentives From Utility Companies
The major utility companies in Michigan are DTE Energy and Consumers Energy. DTE Energy offers rebates for things like high-efficiency furnaces, AC units, and water heaters. Through December 31, 2025, you can receive a $200 bonus if you install a furnace that’s part of their approved incentive list. Also, free furnace tune-ups are available until the end of the year. This maintenance is incredibly important when it comes to prolonging the life of your current equipment and avoiding efficiency issues.
Consumers Energy offers rebates for customers who upgrade to a smart thermostat. This device can be extremely helpful when it comes to avoiding overuse of your HVAC system. You can also use your smart thermostat to receive alerts for service or maintenance, which ensures system efficiency. Rebates are also available from Consumer Energy for high-efficiency boilers and central air conditioning units. You can use many of these incentives along with other federal credits and rebates.
Adhering to Program Deadlines
You will need to have your HVAC replacement or installation completed by December 31, 2025, to qualify for these incentives. Federal credits usually reset on an annual basis. The rebates that are provided only in Michigan are awarded on a first-come, first-served basis. In other words, the funding may have run out by the time you are looking to utilize it. If you know that you’re in need of HVAC equipment but it’s not an emergency, consider waiting until next year.
Who Is Eligible?
To qualify for 2025 tax incentives in the state of Michigan, the equipment you choose must meet efficiency standards. You’ll need to read the fine print of the application, but these are usually standards that are put in place by ENERGY STAR or the Consortium for Energy Efficiency (CEE).
The property where the new equipment is being installed must be at a primary residence. You can’t use the incentive for a vacation or rental home.
Certain income thresholds may be in place depending on the rebate. You may be eligible for a higher rebate if your annual income is below $300,000.
How Do You Claim an Incentive?
If you meet all the eligibility criteria, you can go ahead and claim your credits and rebates. There are different filing and claiming requirements, depending on what you’re applying for. Federal tax incentives are claimed through the IRS using Form 5695 when you’re filing your taxes. State rebates are applied to the cost of your purchase at the point of sale. In some cases, a contractor will submit for reimbursement on your behalf. Lastly, utility rebates are submitted using a simple online form. You’ll need to include proof of purchase and professional installation. Most rebates are not eligible if you perform a DIY installation.
What Are the Benefits of Tax Incentives?
While you may enjoy a lower upfront cost for your investment, there are long-term benefits as well. You can expect new and efficient HVAC equipment to reduce your monthly utility bills. Your upgrade may pay for itself in a few short years, depending on what you’ve installed. Also, the value of your home will increase. Potential buyers appreciate energy efficiency. If you’re planning to sell soon, your return on investment may be worth what you pay initially.
Homeowners enjoy peace of mind knowing that they are reducing their carbon footprint. The climate in West and Southwest Michigan requires frequent use of heating and cooling equipment. Achieve indoor comfort while protecting the environment.
Other HVAC Considerations
Even with rebates and incentives, it may be expensive to invest in new HVAC equipment. Consider the type of equipment you want, the purchase price, the installation cost, and long-term maintenance/repairs. We mentioned the availability of certain incentives. If you wait too long, you risk not receiving any monetary compensation.
Work with our experienced team to determine the best method of reducing energy use and purchasing equipment upgrades. Choosing the right equipment, stacking incentives, and planning ahead is the best way to save money.
The HVAC tax incentives that are available in Michigan in 2025 provide an opportunity to save a substantial amount of money. Whether you’re interested in learning more about MiHER, HEAR, or utility company rebates, our team at Service Professor is here to help. We can also take care of new HVAC equipment installation. We offer financing on approval to further help offset the cost of an upgrade.
Contact us at Service Professor to learn more about our HVAC services in West or Southwest Michigan.
