The landscape of the HVAC industry is poised for significant changes with the recent passage of the “Big Beautiful Bill.” It’s crucial to understand both the promising opportunities and potential challenges this legislation introduces for the HVAC sector.
Positives
One positive aspect of the bill for the HVAC industry is that families can now use 529 education savings plans to pay for career certifications, apprenticeships, and licensing programs, which include HVAC training. Previously, 529 plans were used for college tuition only.
Another positive for the HVAC industry is that the qualified business income deduction, Section 199A, becomes permanent and with enhanced advantages, affecting HVAC contractors operating as S corporations, partnerships, and sole proprietorships. Meaning HVAC contractors can continue to deduct up to 20% of their qualified business income.
The enhanced advantage is that it includes a higher income threshold, so the phase-out begins at $75,000 for individuals and $150,000 for married couples that file jointly. Previously, the limits were $50,000 for individuals and $100,000 for married couples, meaning that more HVAC contractors can claim the deduction before reaching the income limit.
Negatives
Now on to the negative aspects of the bill for the HVAC industry. Section 25C and 25D tax incentives will be repealed for projects beginning after Dec. 31, 2025. These residential tax incentives were made to encourage homeowners to invest in installing energy-efficient and clean energy improvements, driving more business to HVAC contractors.
Section 25C, which was the energy efficiency home improvement credit, was worth up to $3,200 annually for qualifying efficient home upgrades and became a key driver of energy-efficient HVAC equipment, and Section 25D, which was the residential clean energy credit, included a 30% federal tax credit for the installation of geothermal heat pumps.
Another negative aspect of the bill concerns commercial tax incentives. Commercial HVAC tax incentives are also being phased out. However, it’s on a different timeline than the residential incentives. Sections 45L and 179D are set to end for upgrades and projects that begin after June 30, 2026.
Section 45L provides tax credits to homebuilders and developers who construct or substantially reconstruct energy-efficient residential homes. Section 179D, which was enacted in 2005 and made permanent in 2020, allows commercial building owners to claim deductions for investments in high-efficiency lighting, HVAC systems, and building envelopes. This provision has been said to help drive job growth and spur innovation across engineering, manufacturing, and construction.
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Acosta Heating, Cooling & Electrical has been serving the Charlotte Metro Area since 1972. They are family-owned and operated, offering same-day service and financing options. Call them for heating and air conditioning services in Charlotte, NC.