Short answerSoutheast Michigan homeowners can stack up to four kinds of help on a qualifying HVAC install: the federal 25C tax credit (30 percent up to annual caps, higher for heat pumps), a DTE Energy or Consumers Energy rebate, and for income-qualified households, Michigan's HOMES and HEAR rebates through EGLE. Amounts and rules change every year, so verify the current program before you buy.
Four programs, four sets of rules
When someone in Ann Arbor or Canton asks what rebates they can get on a new furnace or heat pump, the honest answer is "it depends on the year, the equipment and your income," because four separate programs touch HVAC in Southeast Michigan and each has its own qualifying list, paperwork and deadline. This guide lays out the shape of each so you know what to ask about. It does not promise amounts, because every one of these has changed at least once in the last few years and will change again.
The federal 25C Energy Efficient Home Improvement Credit
The 25C credit is a federal income tax credit, claimed on your return for the year the equipment was placed in service. As it stands, it covers 30 percent of the cost of qualifying equipment, with caps:
- Up to a capped amount, currently $600, per qualifying item for a central air conditioner or a gas furnace that meets the efficiency threshold.
- Up to a higher cap, currently $2,000, for a qualifying heat pump or heat pump water heater.
- An overall annual limit that resets each tax year, which is why some homeowners split a furnace and an AC across two Decembers.
What qualifies is set by efficiency tier, not by brand. Historically that has meant a high-efficiency condensing furnace, a central AC at a specified SEER2 and EER2, and heat pumps meeting cold-climate or efficiency criteria, with the specific thresholds published for each year. Equipment also has to be installed in your primary residence.
Two cautions. First, this is a credit against tax owed, not a refund check, so it only helps if you have a tax liability to offset. Second, Congress has modified this credit before and there have been proposals to end or shorten it. Confirm the current-year rules at the IRS site or with your tax preparer before you treat it as money in hand. We give you the manufacturer's certification and the itemized invoice; the claim is yours to file.
DTE Energy and Consumers Energy rebates
DTE serves gas and electric across nearly the whole 20-mile radius around Ypsilanti. Its residential energy efficiency program has offered rebates on high-efficiency furnaces, central AC, heat pumps, smart thermostats, and in some years on tune-ups and duct sealing. The amounts, the qualifying efficiency levels and whether a given measure is funded at all are reset each program year, and funds for popular measures sometimes run out before December.
The mechanics: the equipment has to meet the year's threshold, the installer is often required to be a participating contractor, and the application goes in after the install with the invoice and the model numbers. Some rebates are instant at the contractor level; others are mailed. DTE Energy rebates for HVAC walks through the program in detail, and dte.com has the live list.
Consumers Energy serves gas in parts of western Washtenaw around Chelsea, Dexter and Manchester, and some addresses in Livingston County. Its residential rebate program parallels DTE's: high-efficiency furnaces, heat pumps, thermostats, and periodically other measures, with amounts that shift annually. If your gas bill comes from Consumers, that is the program you apply to, even if your electric is DTE. Consumers Energy rebates for HVAC covers the specifics.
Michigan Home Energy Rebates (HOMES and HEAR)
These are the federally funded, state-run programs created under the Inflation Reduction Act and administered in Michigan by EGLE, the Department of Environment, Great Lakes, and Energy. They are rolling out in phases, and the two pieces work differently:
- HEAR (Home Electrification and Appliance Rebates) is income-based. Households under a set percentage of area median income can get point-of-sale rebates on heat pumps, heat pump water heaters, electrical panel upgrades and wiring, with the largest rebates for the lowest income tier. The heat pump rebate can be substantial.
- HOMES (Home Efficiency Rebates) pays based on modeled or measured whole-home energy savings, so it rewards a package of work, like insulation plus a heat pump, rather than a single appliance. Income affects the amount.
Both require participating contractors and, for HOMES, an energy assessment. Availability has varied by region and by the state's rollout schedule, so check EGLE's Home Energy Rebates page for whether your county and your measure are currently open.
Because these are point-of-sale rebates in many cases, the contractor has to be enrolled before the job, and the income verification happens up front. A household in Ypsilanti or Inkster that qualifies at the lower income tier could see the largest share of a heat pump covered of any program on this page, which is why it is worth checking eligibility before assuming a heat pump is out of reach.
How they stack
Generally, you can combine a federal tax credit with a utility rebate on the same equipment, because one is federal and one is utility-funded. The state HOMES and HEAR rebates have rules about combining with other federal money and with each other, and the 25C credit is calculated on your out-of-pocket cost after rebates in some readings of the rules. Ask your tax preparer; we are an HVAC company, not accountants. What we can do is make sure the equipment you choose actually meets the thresholds for every program you plan to use, because a furnace that misses the DTE cutoff by one AFUE point is an expensive mistake.
What qualifies, in practical terms
- Furnaces: condensing units at or above the year's AFUE threshold, usually meaning 96% or 97% with an ECM blower. An 80% furnace qualifies for nothing. Furnace efficiency 80 vs 96 explains the difference.
- Central AC: higher SEER2 and EER2 tiers, typically two-stage 16 SEER2 and up. A 14.3 SEER2 builder-grade unit does not qualify.
- Heat pumps: the biggest incentives of any category. Cold-climate and high-efficiency models hit all four programs. Heat pump installation cost shows what the incentives do to the installed number.
- Heat pump water heaters: 25C up to the heat pump cap, plus utility rebates.
- Smart thermostats: small utility rebates most years.
- Tune-ups and duct sealing: DTE has funded these in some years.
How we handle it
On every replacement estimate we tell you which tier of equipment qualifies for which program, give you the AHRI certificate and the itemized invoice, and fill out the contractor portion of any utility application. We do not quote a net price with rebates subtracted, because the rebate is between you and the program, and we have seen homeowners in Pittsfield and Saline burned by contractors who promised a rebate that had already run out of funds. The equipment price is the equipment price; the rebate is a separate check you may receive. Our furnace installation and heat pump installation pages describe the equipment choices.