Replacing Your HVAC System? Here’s How to Save with Rebates and Tax Credits [2025]

Replacing your HVAC system is a major decision for any homeowner—and if you live in Charleston, it’s not a matter of if, but when. With the heat and humidity we experience year after year, an aging or inefficient system can drive up your energy bills and leave you feeling uncomfortable in your own home. While the cost to replace an HVAC system can seem overwhelming at first, rebates and federal tax credits can help reduce that burden—making a new system more affordable than you might expect.

For more than 20 years, our Charleston, SC, heating and air team has helped hundreds of homeowners make smart, affordable HVAC upgrades—and along the way, we’ve learned what really makes a difference. In this guide, we’ll walk you through the available rebates and credits for replacing an HVAC system, how they work, and where to start if you want to lower your out-of-pocket costs without compromising on comfort.

What Are Rebates and Tax Credits—and How Do They Help You Save?

The simple answer is that rebates and tax credits are incentives from the government and businesses to offer relief when replacing your HVAC system and HVAC ductwork or Geothermal system and Geothermal ductwork. Let’s now define in detail what rebates and tax credits are, and how they can help you save money when replacing your system.

Understanding Rebates: How Instant Savings Can Lower Your Upfront Costs

Rebates—offered by utility companies, manufacturers, or government programs—are designed to make it easier for homeowners to upgrade to energy-efficient systems. When replacing an HVAC system with a more efficient model, you can often receive a rebate as an instant discount on the cost of the new system or the installation. It’s a great way to lower your upfront costs and start saving immediately.

Understanding Tax Credits: How Annual Savings Can Reduce What You Owe

On the other hand, tax credits work a little differently. Instead of offering you instant savings, tax credits reduce the amount of money you owe on your tax return at the end of the year. For example, if your tax bill is $2,000 and you qualify for a $600 tax credit for installing an energy-efficient HVAC system, you will only need to pay $1,400 in taxes.

Using Both Together: How to Maximize Savings on Your HVAC Replacement

In many cases, rebates and tax credits can be combined for even greater savings. Not only will you get an instant discount on the cost to replace your HVAC system through a rebate, but you’ll also be able to claim a tax credit when tax season rolls around. This one-two punch of savings can make the decision to upgrade feel less stressful—and a lot more doable for your budget.

Charleston Rebates That Help Offset the Cost to Replace an HVAC System

Dominion Energy is the leading energy provider in Charleston, and they offer a variety of rebates to encourage homeowners to upgrade to more energy-efficient systems. If you’re thinking about replacing your HVAC system, these rebates can help offset your upfront costs and make the upgrade more manageable.

Rebates for Energy-Efficient Heat Pumps & Air Conditioners

Dominion Energy offers up to a $500 rebate for ENERGY STAR® certified heat pumps or air conditioners. This rebate is available when you replace an older HVAC system with a new, energy-efficient heat pump or air conditioner, including a variety of Trane HVAC systems across their Premier, Priority, and Choice lines.

Rebates for Ductwork Sealing & Insulation

Even if you’re not replacing your HVAC system, you can still save money with Dominion Energy’s $300 rebate for ductwork sealing and insulation. Poorly sealed or insulated ductwork can lead to significant energy loss, overwork your HVAC system, and cost you money. Sealing and insulating your ducts is an easy step to improve your system’s efficiency, and this rebate is a great way to help cover the cost.

Rebates for High-Efficiency Natural Gas Furnaces

If your home uses natural gas for heat, you may qualify for a $350 rebate by upgrading to a high-efficiency gas furnace with a minimum 95% AFUE (Annual Fuel Utilization Efficiency) rating. These high-efficiency furnaces are designed to use less fuel and produce more heat, which means you’ll save money on your energy bills while enjoying reliable warmth during the colder months. Taken together, these Dominion Energy rebates can significantly lower the cost to replace your HVAC system.

Federal Tax Credits for Replacing HVAC Systems with Energy-Efficient Upgrades

In addition to local rebates, many homeowners also qualify for federal tax credits when they install energy-efficient HVAC systems. These credits were originally established under the Inflation Reduction Act as part of a broader push to lower energy usage and reduce emissions nationwide. However, recent legislation has changed the timeline for these incentives—so if you’re planning a system upgrade, now is the time to act.

What the Inflation Reduction Act Means for HVAC System Upgrades

As part of the Inflation Reduction Act, homeowners can claim tax credits for energy-efficient home improvements, including HVAC systems. While these tax credits were initially set to run through 2032, the One Big Beautiful Bill Act has shortened the timeline. Both the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit now expire after December 31, 2025. That means homeowners have a limited window to take advantage of these savings.

The Energy Efficient Home Improvement Credit: Savings on Heat Pumps, Air Conditioners, and Furnaces

Under the Energy Efficient Home Improvement Credit, homeowners can claim a 30% tax credit on the cost of installing a qualified heat pump, air conditioner, or gas furnace now through the end of 2025.

• Heat Pumps: Installing a qualified heat pump could make you eligible for a federal tax credit of up to $2,000. Known for their energy efficiency, many models—including a wide selection of Trane HVAC systems—meet the requirements for this credit.
• Air Conditioners & Gas Furnaces: If you install a high-efficiency air conditioner or gas furnace, you can receive a 30% tax credit, up to $600 per system. This means you can upgrade to a more efficient system and enjoy long-term energy savings while reducing your tax burden.

The Residential Clean Energy Credit: Savings on Geothermal Heating and Cooling Systems

For homeowners looking for a truly long-term energy-efficient solution, geothermal heating and cooling systems are an excellent option. The Residential Clean Energy Credit offers a 30% tax credit for installing a Water Furnace geothermal heat pump—also now set to expire at the end of 2025.

Geothermal systems tap into the steady temperature beneath the ground to heat and cool your home, offering one of the most efficient and eco-friendly options available today. While the initial investment in a geothermal system can be higher than in traditional HVAC systems, the tax credit helps offset some of the cost, and the long-term energy savings can be substantial.

How to Apply for Rebates & Tax Credits on Your Charleston HVAC System Replacement

So, what steps should you take to make sure you’re not missing out on any available savings? Let’s take a look.

How to Claim Dominion Energy HVAC Rebates

To claim a rebate from Dominion Energy, you’ll need to follow a few simple steps. First, hire a licensed Charleston, SC heating and air service provider to install your new system. Working with a licensed professional ensures that the installation is done properly and that you meet all the requirements for rebate eligibility. At AGL, all of our technicians are licensed Trane Comfort Specialists, which means they’ve been specially trained to install energy-efficient Trane HVAC systems—and help you take advantage of those rebates!

Once your system is installed, your HVAC service provider will typically handle the paperwork and submit the rebate application to Dominion Energy. Be sure to keep all receipts and documents related to the installation, as you may need them to claim the rebate.

How to Claim Tax Credits for Energy Efficiency

When it comes to claiming tax credits, you’ll need to file IRS Form 5695, which is used for energy-efficient home improvements. Be sure to keep receipts for your new HVAC system and installation, as well as any other documents that prove the system meets the necessary efficiency standards. You can then claim your tax credits when you file your annual tax return.

Replacing Your HVAC System Doesn’t Have to Break the Bank

If you’re planning to replace your HVAC system, the team at AGL Heating & Air can help. As certified Trane Comfort Specialists with over 100 years of combined experience, we install high-efficiency ENERGY STAR® systems and guide you through every available savings opportunity—including Dominion Energy rebates, federal tax credits(before they expire!), and exclusive AGL specials. Don’t wait for the summer heat to reach its peak—explore your options now and start saving with Charleston, SC, heating and air experts you can trust.

Don’t wait- systems must be installed by the end of 2025 to qualify for federal credits. Beat the deadline, lock in your savings, and enjoy year-round comfort with AGL, heating and air experts you can trust. 

Disclaimer: AGL Heating & Air cannot be held responsible or guarantee your HVAC tax credit or rebate eligibility, or guarantee the accuracy of the amounts and details mentioned. Rebates and tax credits are subject to change without notice. For specific tax information, please consult your tax advisor or financial professional.