How to Save on HVAC Systems in Texas

Federal Tax Credits Are Available, But Expiring Soon

Keeping your home comfortable in Texas isn’t cheap, especially if your HVAC system is outdated or inefficient. Upgrading to a new system is a major financial investment, but it can lead to significant energy savings and improved comfort throughout the year.

To help make these upgrades more affordable, several rebates and tax credits are available for homeowners who choose energy-efficient systems. However, some of these incentives are set to expire soon, so it’s important to act quickly.

Federal HVAC Tax Credits

Thanks to the Inflation Reduction Act, homeowners can claim up to $3,200 per year in tax credits for qualified energy-efficiency upgrades. While originally expected to run through 2032, these HVAC credits are now scheduled to expire after December 31, 2025.

Here’s how the incentives break down:

• Geothermal Heat Pumps. Eligible for a 30% credit on the total project cost (no cap).
• Air-Source Heat Pumps. Qualify for 30% of the cost, up to $2,000. In the South, all ENERGY STAR®-certified models are eligible. In the North, only ENERGY STAR Cold Climate models (with an EER ≥ 10) qualify.
• Central Air Conditioners. Eligible for 30% of the cost, up to $600. Split systems must meet SEER2 ≥ 17 and EER2 ≥ 12 to qualify.
• Gas Furnaces. Eligible for 30% of the cost, up to $600. Must have an AFUE of 97% or higher to qualify.
• Natural Gas and Oil Boilers. Qualify for 30% of the cost, up to $600. Natural gas boilers require an AFUE rating of 95% or higher. Oil boilers need to be rated by the manufacturer for use with fuel blends containing at least 20% biodiesel, renewable diesel, or other eligible biofuels.
• Electrical Panel Upgrades. If you need to upgrade your panel for a new heat pump, you could qualify for an additional $600 credit.

To claim these credits, make sure the equipment is installed by the end of 2025 and meets ENERGY STAR and IRS requirements. You’ll also need to submit a Product Identification Number from the manufacturer when filing your taxes.

Local and Utility Rebates in Texas

In addition to federal credits, many Texas utility companies offer rebates that can further reduce your out-of-pocket costs. Here are a few worth knowing about:

• Austin Energy. Offers rebates averaging $500 to install a new, energy-efficient air conditioning system and potentially an additional $200 if you enroll in the Home Energy Savings program within six months after receiving your rebate. 
• SWEPCO (East Texas). Provides utility discounts for qualifying eco-friendly versions of appliances, HVAC equipment, insulation, and similar upgrades to help offset their higher upfront cost. SWEPCO lets you filter by state (Texas, Arkansas, Louisiana) and see available amounts and details for eligible upgrades.
• CPS Energy (San Antonio Area). Offers savings of $90 to $310 per ton for qualifying central air conditioners and heat pumps, depending on system efficiency.
• State Weatherization Assistance Program. For income-qualified homeowners, the state may cover the cost of insulation, HVAC repairs, duct sealing, or even full system replacements at little or no cost.

How to Find HVAC Rebates

Those are just a few examples of potential HVAC incentives in Texas. To find discounts available in your area:

• Use the ENERGY STAR Rebate Finder. This tool lists available federal, state, and local utility incentives based on your ZIP code.
• Check your utility provider’s website. Look under sections like “Home Energy Savings,” “Rebates,” or “Energy Efficiency Programs.”
• Talk to a licensed HVAC dealer. Many dealers are familiar with available incentives and can help you choose qualifying equipment and complete the rebate paperwork.

Tips to Cut HVAC Energy Costs

Even if you’re not replacing your entire system, there are still steps you can take to lower your energy bills and improve comfort:

Get a Home Energy Audit

A professional audit identifies where your home is losing energy, like leaky ductwork, poor insulation, or inefficient windows. Some utilities offer audits for free or at a reduced cost, and they may qualify for a tax credit of up to $150.

Seal Ductwork

Leaky ducts can waste 20-30% of conditioned air. Sealing them improves efficiency and keeps more of that cooled or heated air in your living space.

Add Insulation

Proper insulation, especially in the attic, keeps your home cooler in summer and warmer in winter. This reduces the load on your HVAC system and helps maintain even indoor temperatures.

Install a Smart Thermostat

Smart thermostats can automatically adjust temperatures based on your schedule, helping reduce system run time and save energy without sacrificing comfort.

Close Blinds and Use Ceiling Fans

Blocking direct sunlight during peak hours can keep rooms cooler naturally. Ceiling fans help circulate air, allowing you to raise the thermostat setting without feeling warmer.

Keep Your System Maintained

Regular tune-ups, replacing air filters, and addressing repairs promptly can keep your system running smoothly and help you avoid expensive breakdowns.