How Central Indiana Homeowners Are Combining Federal Tax Credits, State Rebates, and Utility Incentives Before Time Runs Out
If you’ve been putting off that furnace or heat pump replacement, waiting just became expensive.
Federal tax credits worth up to $2,000 per system were supposed to last through 2032. Indiana’s brand-new Energy Saver Program wasn’t even on the radar last year. Local utility rebates are still available. And right now—for the next 45 days—all three can stack together.
Here’s the reality: One Central Indiana homeowner replacing an old furnace and AC with a high-efficiency heat pump system could receive:
- $2,000 federal tax credit
- Up to $14,000-$18,000 Indiana Energy Saver rebate (income-qualified)
- $300-$500+ utility rebate
Total potential savings: $16,300-$20,500
But on January 1, 2026, most of these incentives disappear forever.
The Triple Stack That Wasn’t Supposed to Happen
Let me explain how we got here.
When the Inflation Reduction Act passed in 2022, homeowners had until December 31, 2032 to claim federal tax credits for energy-efficient HVAC upgrades. That’s nearly a decade to plan, budget, and upgrade on your own timeline.
Then in July 2025, Congress passed the “One Big Beautiful Bill” and quietly pulled that deadline forward by seven years.
The Energy Efficient Home Improvement Credit (Section 25C) now expires December 31, 2025. That’s the credit covering heat pumps, air conditioners, and furnaces.
The Residential Clean Energy Credit (Section 25D) for geothermal systems? Also cut short—originally set for 2034, now ending December 31, 2025.
Meanwhile, Indiana launched the Energy Saver Program in May 2025—a $182 million state rebate program funded by federal money. It’s first-come, first-served, and early reports suggest 30% of available funds have already been claimed.
Add in local utility rebates that have been quietly available all along, and you’ve got a once-in-a-lifetime convergence of savings opportunities.
The catch? You have six weeks to act.
Federal Tax Credits: What’s Available Right Now
Let’s break down exactly what you can claim before the December 31 deadline.
Air-Source Heat Pumps: Up to $2,000
Heat pumps are the single biggest opportunity. These systems replace both your furnace and air conditioner with one ultra-efficient unit that heats and cools your home year-round.
The credit: 30% of total project cost (equipment + installation), capped at $2,000
Requirements to qualify:
- Must be ENERGY STAR Most Efficient certified
- Minimum efficiency ratings: 15.2 SEER2, 8.1 HSPF2, 10 EER2
- Must be installed in your primary residence
- Requires manufacturer’s 4-digit QM code for tax filing
Why it matters: A $12,000 heat pump installation gets you the full $2,000 credit. That’s $2,000 you get back when you file your 2025 taxes.
Central Air Conditioners: Up to $600
Replacing just your AC? There’s still a credit available.
The credit: 30% of total cost, capped at $600
Requirements:
- Split systems: SEER2 ≥17.0 and EER2 ≥12.0
- Packaged systems: SEER2 ≥16.0 and EER2 ≥11.5
- Must be ENERGY STAR certified
- Requires QM code
Gas Furnaces & Boilers: Up to $600
High-efficiency furnaces qualify for the same $600 credit.
Requirements:
- Must have AFUE ≥97%
- ENERGY STAR certified
- Counts toward the $1,200 annual cap (shared with AC units)
Geothermal Heat Pumps: 30% with NO CAP
Here’s where it gets interesting. Geothermal systems fall under a different tax credit (Section 25D) with no annual maximum.
The credit: 30% of total cost with no dollar limit
What this means: A $25,000 geothermal installation = $7,500 tax credit
Requirements:
- Must meet ENERGY STAR program requirements
- Can apply to both primary and secondary homes
- Must be installed by December 31, 2025
Critical note: This credit was originally set to last through 2034. Congress cut it short by nine years. After December 31, it’s gone.
The Fine Print on Federal Credits
Annual maximum: $3,200 total across ALL home energy improvements
- Heat pumps have a separate $2,000 cap (not counted in the $1,200 building envelope limit)
- You can claim $2,000 for a heat pump PLUS $1,200 for other improvements (windows, doors, insulation, etc.)
The 2025 QM requirement: As of January 1, 2025, all qualifying equipment must have a Product Identification Number (QM code) from a qualified manufacturer. You’ll need this documentation to claim the credit on your tax return.
Non-refundable credit: This can only offset taxes you owe. If your tax bill is $1,500, you can claim up to $1,500 even if you’re eligible for more. The excess doesn’t carry forward.
How to claim: You’ll file IRS Form 5695 (Residential Energy Credits) with your 2025 federal tax return. Consult your tax advisor for guidance specific to your situation.
Indiana’s Brand-New Energy Saver Program
This is the game-changer most homeowners don’t know about yet.
In May 2025, Indiana launched a $182 million rebate program specifically for energy-efficient home upgrades. The money comes from the federal government through the Inflation Reduction Act, but it’s administered by the Indiana Office of Energy Development.
There are two programs, and you may qualify for one or both.
HOMES Program (Home Efficiency Rebates)
This program funds whole-home energy retrofits that achieve at least 20% energy savings.
What qualifies:
- HVAC systems
- Water heaters
- Insulation
- Air sealing
- Duct sealing
How much you can get:
- Low-income households (under 80% area median income): Up to 100% of project costs, maximum $18,000
- Moderate-income households (80-150% area median income): Partial rebates based on income and project scope
Important details:
- Requires a whole-home energy assessment (provided free through the program)
- Must achieve minimum 20% predicted energy savings
- Rebate is applied as an instant discount at point of sale—you don’t pay it and wait for reimbursement
- First-come, first-served basis
HEAR Program (Home Appliance Rebates)
This program targets specific high-efficiency equipment for low- and moderate-income households.
Who qualifies: Households earning under 150% of area median income
What you can get rebates for:
- Heat pump HVAC systems
- Heat pump water heaters
- Clothes dryers
- Electric stoves and cooktops
- Electrical panel and wiring upgrades
- Insulation, air sealing, and ventilation
Maximum rebate: $14,000 total across all qualified projects
The income threshold: For Indianapolis area, 150% of area median income is approximately $135,000 for a family of four—higher than many people expect.
How to Access These Rebates
- Visit IndianaEnergySaver.com to check eligibility and apply
- Schedule your free energy audit through the program
- Work with an approved contractor for installation
- Rebates are automatically applied during installation as a discount
Critical reminder: This is first-come, first-served. The $182 million fund won’t last forever, and early reports suggest significant funds have already been claimed.
Local Utility Rebates: The Third Layer
Don’t overlook your utility company. Many Central Indiana providers still offer additional rebates for high-efficiency HVAC equipment.
AES Indiana
- Heat pump installation incentives
- HVAC tune-up rebates
- Smart thermostat rebates
- Visit aesindiana.com for current rebate applications
NIPSCO (Northern Indiana)
- Heat pump rebates: Up to $500
- HVAC tune-up rebates
- Smart thermostat rebates: $30-$50
- Central AC installation incentives
- Visit nipsco.com/rebates for details
Rural Electric Cooperatives
If you’re served by South Central Indiana REMC, Southern Indiana Power, or other cooperatives:
- Heat pump rebates: $300-$500
- Geothermal system incentives: $1,000+
- Tune-up rebates: $50-$100
- Water heater rebates
- Contact your cooperative directly for applications
The advantage: These rebates can be stacked with both federal credits and state rebates, as long as you’re not double-dipping on the same dollar of expense.
Real Savings: What This Looks Like in Your Wallet
Let’s make this concrete with three real scenarios.
Scenario 1: Middle-Income Homeowner, Heat Pump Replacement
Situation: You’re replacing a 15-year-old gas furnace and AC with a high-efficiency heat pump system.
System cost: $12,000 installed
Savings breakdown:
- Federal tax credit: $2,000
- Utility rebate (AES Indiana): $300
- Your out-of-pocket cost: $9,700
- Plus annual energy savings: $800-$1,200
Payback period: 8-10 years becomes 5-6 years with incentives
Scenario 2: Income-Qualified Homeowner, Heat Pump Replacement
Situation: Same system, but your household income qualifies for Indiana HEAR program.
System cost: $12,000 installed
Savings breakdown:
- Federal tax credit: $2,000
- Indiana HEAR program rebate: $8,000 (applied at installation)
- Utility rebate: $300
- Your out-of-pocket cost: $1,700
With 0% financing available:
- $1,700 ÷ 36 months = $47/month
- Your energy savings ($70-$100/month) MORE than cover the payment
Net result: Free heat pump, plus you pocket the energy savings.
Scenario 3: Geothermal Investment for Long-Term Savings
Situation: You’re ready to invest in the most efficient system available and eliminate fossil fuels entirely.
System cost: $25,000 installed (premium geothermal system)
Savings breakdown:
- Federal tax credit (30%, no cap): $7,500
- Indiana HOMES program (income-qualified): $10,000
- Utility incentive: $1,000
- Your out-of-pocket cost: $6,500 for a $25,000 system
- Lifetime energy savings vs. traditional HVAC: $40,000+
The math: You’re getting a $25,000 system for $6,500. Every year after that, you’re saving $1,200-$1,800 on energy costs compared to gas heating and traditional AC.
Why December 31 Is a Hard Deadline
“Can’t I just wait until next year?”
No. Here’s why.
Federal Credits Are Gone
Congress explicitly terminated these programs effective December 31, 2025. There’s no extension coming. The political climate that created these credits has shifted, and the new administration accelerated the termination dates.
After midnight on New Year’s Eve, the federal credits disappear.
State Rebates Are First-Come, First-Served
Indiana’s Energy Saver Program has $182 million allocated. That sounds like a lot until you realize:
- Thousands of homeowners are eligible
- Commercial and multifamily properties also qualify
- Early reports suggest 30% of funds may already be claimed
- Once the money runs out, the program closes—potentially before year-end
Installation Must Be Complete
To claim the federal credit, your system must be fully installed and operational by December 31, 2025. Not scheduled—completed.
The installation timeline reality:
- Equipment ordering: 1-2 weeks (depending on manufacturer and model)
- Scheduling installation: 1-3 weeks in normal conditions
- Actual installation: 1-3 days
- Potential weather delays in December: Likely
Bottom line: If you call the week of Christmas, you’ll probably miss the deadline. If you call in late November, you’re cutting it close.
The smart move: Call now. Schedule your free assessment. Lock in your installation date. Give yourself margin.
Why Waiting Costs More Than You Think
Even if the incentives weren’t expiring, there are three hidden costs to delaying your HVAC upgrade.
1. Emergency Replacement Premium
Right now, you can schedule installation within 1-2 weeks on your timeline. You can plan around work, travel, and holiday schedules.
If your furnace dies on December 28 when it’s 12°F outside?
- You’re looking at 3-5 day wait times (everyone’s furnace is breaking)
- Emergency service fees apply
- Limited equipment availability means fewer options
- Rush installation charges
- You have no negotiating power
The difference: Installing on your schedule = standard pricing. Emergency replacement in winter = easily $1,000-$2,000 more expensive.
2. Rising Equipment Costs
HVAC equipment prices have increased 15-25% since 2020. Industry analysts expect continued pressure from:
- Tariffs on imported components
- Tightening efficiency regulations
- Supply chain constraints
The system that costs $12,000 today could easily be $13,500 next year—before you account for losing the tax credits.
3. Ongoing Energy Waste
Every month you run an inefficient 15-year-old furnace, you’re burning money.
Average waste from an aging HVAC system: $75-$150 per month compared to high-efficiency equipment.
December + January + February = $225-$450 in unnecessary energy costs.
That’s money you’ll never get back, even after you eventually upgrade.
Common Questions Answered
Q: Can I really stack all three incentive types?
A: Yes, but you can’t double-dip. Federal credits, state rebates, and utility rebates can all apply to the same project as long as you’re not claiming the same dollar twice. Check with your tax advisor for guidance on your specific situation.
Q: What if my income is too high for Indiana rebates?
A: You still get federal credits (which have no income limits) plus utility rebates. For a heat pump system, that’s still $2,300-$2,500 in savings.
Q: Do I need to file these separately on my taxes?
A: The federal credit goes on Form 5695 when you file your 2025 tax return in early 2026. Indiana rebates are applied at installation—they’re not taxable income and don’t require separate filing. Consult your tax advisor for specific guidance.
Q: What if I’m not ready to decide right now?
A: Get a free assessment to understand your options. Calculate your exact savings and see what equipment makes sense for your home. But don’t wait until mid-December to start this process.
Q: My current system still works. Why replace it?
A: With these incentives, the payback period drops from 10-15 years to 3-6 years. If your system is over 12 years old, replacement often makes financial sense even when it’s still running—especially before you lose thousands in available incentives.
Q: Can I claim credits for systems I installed earlier in 2025?
A: Yes! If you installed qualifying equipment anytime in 2025, you can still claim the federal credit on your 2025 tax return. Make sure you have all required documentation including the manufacturer’s QM code.
Q: What documentation do I need to claim these credits?
A: For federal credits, you’ll need your itemized invoice showing equipment costs and installation, the manufacturer’s certification statement proving the system meets efficiency requirements, and the manufacturer’s QM code. Keep all receipts and documentation for at least three years in case of an IRS audit.
What Happens on January 1, 2026
Let’s be clear about what you’re losing.
Heat Pump Installation
With incentives (installed by Dec 31, 2025):
- $12,000 system
- $2,000 federal credit
- $8,000 state rebate (if income-qualified)
- $300 utility rebate
- You pay: $1,700
Without incentives (installed Jan 1, 2026 or later):
- $12,000 system
- Maybe $300 utility rebate (if still available)
- You pay: $11,700
The difference: $10,000 in lost savings
Geothermal System
With incentives:
- $25,000 system
- $7,500 federal credit (30%, no cap)
- $10,000 state rebate (if qualified)
- You pay: $7,500
Without incentives:
- $25,000 system
- You pay: $25,000
The difference: $17,500 in lost savings
This isn’t a matter of saving a few hundred dollars. For many Central Indiana families, this is the difference between affording a high-efficiency system and being stuck with aging, inefficient equipment for another decade.
How Absolute Comfort Can Help
While you’re responsible for filing tax credits and rebate applications yourself, we make it easier by providing everything you need to claim your savings.
What We Provide
Complete Documentation
- Detailed itemized invoices showing equipment and installation costs
- Manufacturer’s certification statements proving equipment meets all efficiency requirements
- Manufacturer’s QM codes required for 2025 federal tax credits
- AHRI certificates showing exact efficiency ratings
- All paperwork organized and ready for your tax filing
Expert Equipment Guidance
- Help identifying which systems qualify for maximum incentives
- Clear explanations of efficiency requirements and certification levels
- Multiple equipment options with transparent cost breakdowns
- Specifications that meet or exceed federal and state program requirements
Installation Timing
- Flexible scheduling to ensure completion before December 31 deadline
- Professional installation that meets all manufacturer requirements
- Systems tested and operational to qualify for credits
Information and Resources
- Links to IRS Form 5695 instructions
- Indiana Energy Saver Program website and contact information
- Utility rebate program details for your service area
- General guidance on how these programs work (consult your tax advisor for specific tax advice)
What Makes Us Different
✅ Deep knowledge of qualifying equipment – We know exactly which systems meet the requirements for each program
✅ Transparent pricing – Upfront costs, no hidden fees, so you can accurately calculate your incentives
✅ Quality installation – Systems installed correctly the first time, meeting all manufacturer specifications
✅ Deadline awareness – We understand the urgency and prioritize December installations
✅ Documentation excellence – We provide complete, organized paperwork that makes filing easier
✅ Local, trusted service – Serving Central Indiana for years with an A+ BBB rating
✅ 0% financing available – Make upgrades affordable even before incentives are applied
We can’t file your paperwork for you, but we make sure you have everything you need to maximize your savings.
Your Next Steps
The clock is ticking. Here’s what to do right now.
Step 1: Check Your Eligibility
For Indiana Energy Saver Programs:
- Visit IndianaEnergySaver.com
- Use their online calculator to estimate eligibility
- Find out if you qualify for HOMES or HEAR rebates
- See the list of approved contractors
For utility rebates:
- Visit your utility company’s website
- Check current rebate offerings for your service area
- Download rebate application forms
- Note any specific requirements or deadlines
Step 2: Call Absolute Comfort for Your Free Assessment
📞 (765) 534-4328
We’ll schedule a no-obligation consultation to:
- Evaluate your current system and home
- Recommend qualifying equipment options
- Provide detailed pricing for your project
- Give you all the information you need to calculate your potential savings
- Explain documentation we’ll provide
- Discuss financing options
What to expect:
- 45-60 minute in-home consultation
- Complete system evaluation
- Multiple equipment options
- Transparent pricing
- Zero pressure
Step 3: Do Your Own Calculations
Take our pricing, add up the incentives you qualify for, and see what makes sense for your situation:
- Federal tax credit: 30% of cost up to program limits
- Indiana rebate: Check your eligibility at IndianaEnergySaver.com
- Utility rebate: Visit your utility’s website
- Annual energy savings: We’ll help you estimate this
Run the numbers. Talk to your tax advisor. Make an informed decision.
Step 4: Schedule Installation Before Time Runs Out
If you decide to move forward, schedule your installation date as soon as possible. Our December calendar is filling fast, and you need your system fully installed by December 31 to qualify for federal credits.
Earlier is better. Don’t risk missing the deadline.
The Bottom Line
This moment won’t come again.
Federal tax credits that were supposed to last until 2032 are ending in 45 days.
Indiana just launched a $182 million rebate program that’s first-come, first-served.
Utility rebates are still available.
For the first time ever, all three can stack together—potentially putting $10,000-$20,000 back in your pocket for an upgrade you probably need anyway.
But only if you act before December 31, 2025.
Your furnace is getting older. Your energy bills are getting higher. Winter is coming.
The only question is whether you’ll pay full price in 2026 or capture these savings in 2025.
Don’t Leave Money on the Table
Call Absolute Comfort today: (765) 534-4328
Schedule your free assessment. Get the information you need to calculate your exact savings. Lock in your installation date.
The December 31 deadline is real. The savings are real. The opportunity is disappearing fast.
Let’s make sure you’re informed and ready to act.
Disclaimer: This information is provided for educational purposes only and is subject to change. Tax credit and rebate eligibility depends on individual circumstances including household income, equipment specifications, installation dates, and tax liability. This is not tax advice. Consult your tax advisor for guidance specific to your situation. Federal tax credits require filing IRS Form 5695 with your federal tax return. Indiana Energy Saver Program rebates are subject to program rules, funding availability, and income qualification. Visit IndianaEnergySaver.com for official program information. Utility rebate programs vary by provider and are subject to change. Contact your utility company directly for current offerings. Absolute Comfort provides documentation to support your applications but cannot file tax returns, rebate applications, or utility forms on your behalf. All savings estimates are examples only and actual savings will vary based on individual circumstances.