Energy tax credits ended: what heat pumps and solar cost in 2026
The 25C and 25D credits ended with 2025. What a heat pump, solar or insulation job really costs now, and where rebates still exist.
If you are planning a heat pump, solar panels or an insulation upgrade in 2026, budget for the full installed price. The two federal tax credits that used to take a slice off these jobs are over. What is left are state programs, utility rebates and good old-fashioned comparison shopping.
What ended, exactly
According to the IRS, both residential energy credits stopped at the end of 2025:
- 25D, the residential clean energy credit (solar panels and batteries, among others), does not apply to expenditures made after December 31, 2025.
- 25C, the energy efficient home improvement credit (heat pumps, insulation and other efficiency upgrades), does not apply to property placed in service after December 31, 2025.
The wording matters. For 25C the test is when the equipment is placed in service, so a heat pump installed in 2026 does not qualify, even if the contract was signed earlier. If you are unsure about a job that straddled the year end, that is a question for your tax preparer, not your contractor.
One practical consequence: any quote that still shows a "federal tax credit" line subtracted from the price is out of date. Ask the contractor to re-quote at the real price before you compare it with anything else.
What the jobs cost without the credit
Our figures are built the same way for every project: the labor hours each task takes, multiplied by local trade rates, plus materials, then checked against market prices and real quotes. They are before sales tax.
Ducted heat pump. Replacing a furnace and central AC with a 3-ton two-stage or variable-speed heat pump, reusing the existing ducts, typically costs $14,500, with most installs between $11,300 – $18,800. A basic single-stage system runs about $12,000. A cold-climate inverter model, the one to price if your winters are hard, comes to about $18,800. Full breakdown: Heat pump installation.
Solar panels. A 6 kW rooftop array without a battery typically costs $17,000. Adding a 5 kWh battery on a hybrid inverter brings it to about $24,500, and a 10 kWh battery to about $32,700. The battery is the part of the budget most worth questioning now that there is no federal credit to soften it. Full breakdown: Solar panels.
Insulation. We do not publish a national figure for attic or wall insulation in the US yet, because the job varies too much by house. The credit that covered it is gone too, so the payback now rests entirely on your energy bills and any local rebate.
Where rebates still exist
The money has not disappeared entirely; it has moved closer to home.
- State home energy rebates (HEAR and HOMES). Some states run these IRA-funded programs. Availability varies by state, and so do the rules on who qualifies and which equipment counts. Check your state energy office's website before you sign anything.
- Utility rebates. Utilities often offer rebates on heat pumps, insulation and EV chargers. These are easy to miss because contractors do not always mention them, and some require pre-approval or a participating contractor.
- DSIRE. The DSIRE database lists state and utility incentives and is a quick way to see what may apply where you live.
A rebate that needs pre-approval is lost if the equipment goes in first, so do the paperwork before the installer's first visit, not after.
How to adjust your budget
Without the credit, the savings have to come from the job itself.
- Right-size the system. Ask for a room-by-room load calculation (Manual J). Many homes need fewer tons than the furnace and AC they are replacing, and every ton you do not buy is money saved.
- Match the tier to your climate. In mild climates a two-stage or even single-stage heat pump handles winter comfortably. The cold-climate premium makes sense where temperatures stay low for weeks, or if you want to retire the furnace entirely.
- Consider keeping the furnace. A dual-fuel setup, with the heat pump doing most of the work and the furnace covering the coldest days, can let you buy a smaller, cheaper heat pump.
- Seal and insulate first. Duct sealing and attic insulation are usually the cheapest efficiency you can buy, and they can shrink the heat pump you need.
- Question the battery. If your main goal is a lower electricity bill rather than backup power, get one solar quote with a battery and one without, and compare the difference against what the battery actually saves you.
- Time it. HVAC contractors are busiest in the first heat wave and the first cold snap. Spring and fall quotes tend to be more relaxed.
Check the price before you sign
Once you have a quote at the real, credit-free price, put it next to our figures. Our "Is my quote fair?" tool compares the price you were quoted with what homeowners in your area typically pay for the same job, and tells you whether it looks low, typical or high.
For related projects, see Window replacement and EV charger installation; utilities that offer heat pump rebates often cover EV chargers too.