Why the end of federal tax incentives won’t slow heat pump adoption

Posted on:

December 23, 2025

The end of federal tax credits doesn’t mean the end of heat pump growth. During ACCA Premium Strategic Partner Midea’s November webinar, “Heat Pump Momentum: The Next Chapter for Contractors in the Era of OBBBA,” Senior Product Manager David Rames and Engineering Director, Unitary and Ductless Products, Eric Hervol explained why contractors shouldn’t panic about losing this sales tool — and what they should focus on instead.

ACCA members: access the full webinar recording here.

Key highlights

Heat pumps now represent 47% of combined heating system shipments, up from 41% in 2023, and have already overtaken gas furnaces in market share.

Only 25% of heat pumps on the market actually qualified for the 25C tax credits, meaning most sales happened without federal incentives.

Consumer research shows 80% of homeowners know what heat pumps are, but only 4% understand modern cold climate performance capabilities.

The One Big Beautiful Bill Act (OBBBA) makes the 199A qualified business income deduction permanent and expands 529 education savings plans to cover trade school tuition.

Tax credits weren’t the driving force behind the heat pump shift

Hervol pointed out that even with 25C credits available, fewer than one in four heat pumps qualified. The real momentum comes from efficiency improvements, utility incentives, and manufacturers phasing out air conditioning-only systems. State and local utility programs will continue driving adoption in the foreseeable future, regardless of federal policy changes.

Those efficiency improvements are substantial. Modern cold climate heat pumps deliver 200-400% efficiency compared to the 98% ceiling for gas furnaces. Technology improvements in inverter-driven compressors and refrigerant management allow these systems to maintain full heating capacity at temperatures as low as 5°F — a dramatic change from the heat pumps homeowners remember from decades past.

What OBBBA means for HVACR contractors

The qualified business income deduction and accelerated depreciation provisions help small HVACR businesses keep more revenue instead of sending it to Uncle Sam. More significantly, expanding 529 plans to cover trade schools, apprenticeships, and certifications addresses the industry’s most critical challenge: workforce development.

With 110,000 unfilled HVACR positions and 23,000 technicians leaving annually, the industry faces a projected 1.8 open jobs for every available technician. Rames emphasized that Midea has donated high-efficiency equipment to trade schools across North America, specifically to ensure tomorrow’s technicians train on inverter-driven systems, not 25-year-old single-stage units.

Consumer education remains the biggest opportunity for heat pumps

Midea’s research revealed a massive education gap. While 80% of homeowners have heard of heat pumps, 54% don’t understand their full capabilities; many don’t even realize that heat pumps both heat and cool. More striking: contractors remain the most trusted source of equipment recommendations. Consumers consistently reported that they did what their contractor told them to do.

Financing matters more than many contractors realize. Homeowners surveyed said they went with the first contractor who offered financing, even when other bids came in lower. Offering payment options for every job doubled the percentage of financed sales from 17% to 35%.

Rames emphasized that contractors need to educate customers about modern heat pump performance, offer financing options, and present multiple equipment tiers using a “good, better, best” approach. Consumer research showed homeowners trust their contractor’s recommendations above all else — they consistently reported doing what their contractor told them to do.

With heat pump market share climbing from 41% to 47% in just two years, the momentum exists independent of federal tax credits. The contractors who understand that shift will continue growing their heat pump business in 2026 and beyond.

ACCA members can watch the full webinar here.

Midea is an ACCA Premium Strategic Partner. To learn more about our Strategic Partner Program, contact partners@acca.org or visit acca.org/partners.