If you own rental property in the Bay Area, you’ve probably heard about federal energy tax credits and local heat pump rebates and wondered:

“If I upgrade the HVAC in my rental, can I get any of those credits—or are they only for primary residences?”

The answer is: it depends on the type of credit, how you use the property, and whether it’s truly a rental vs your own home.

Plus, even when you can’t get a personal tax credit, you may still benefit through business deductions, depreciation, and local rebates.

This guide from Galaxy Heating & Air Conditioning breaks down what Bay Area rental owners should know about HVAC tax credits, deductions, and incentives.

⚠️ Important: We’re HVAC experts, not CPAs or attorneys. Tax laws change, and your situation is unique. Always confirm with your tax professional before relying on any credit or deduction.

📍 Serving Contra Costa, Alameda & San Francisco counties

📞 Have a rental property HVAC project in mind? Call or text (925) 578-3293.

Quick Answer: Can Rental Properties Get HVAC Tax Credits?

Very short version:

• Most homeowner energy tax credits (like the federal “energy efficient home improvement credit”) are designed for your personal residence, not a pure rental.
• If you live in the property yourself (house hack, duplex, ADU in back), the portion you occupy may qualify like a normal homeowner, and the rental portion is usually treated as a business expense/depreciation, not a personal tax credit.
• Even when you don’t qualify for a personal credit, you may still be able to:
  • Deduct the cost of the HVAC as a rental expense (or depreciate it over time)
  • Access certain local rebates and utility incentives that don’t care whether it’s owner-occupied or rented, only that the upgrade is installed in that property.

So: pure rentals rarely get the same homeowner tax credits, but that doesn’t mean there are no financial benefits at all.

1. The Big Federal Credit Most People Ask About (25C)

The main federal program homeowners talk about for HVAC is the Energy Efficient Home Improvement Credit (under IRC §25C).

Very high-level, for most taxpayers:

• It’s for qualified energy-efficient improvements (like certain heat pumps, high-efficiency ACs, insulation, windows, etc.).
• It’s primarily aimed at your primary residence in the U.S.
• It’s a personal tax credit, not a business/rental credit.

So what about rentals?

As a general rule:

• If the property is 100% a rental that you never personally use as a residence, the cost normally gets handled as a rental property improvement (capitalized/depreciated), not a 25C credit.
• If you live in part of the property (e.g., duplex where you live in one unit and rent the other):
  • Your personal living space may be treated as a primary residence and might be eligible for the homeowner credit on that portion.
  • The rented portion is generally treated like rental property: no personal credit, but handled via depreciation and business deductions.

Exactly how this split works depends on your facts and your CPA’s approach. A common way is by square footage or actual use.

Again: your tax pro is the boss here. Your job (and ours) is to keep good documentation of the equipment, efficiency ratings, and invoices.

2. Rental Property = Business Deductions & Depreciation

Even when you can’t use a personal homeowner credit, rental properties are usually treated as a business or investment, which may give you other benefits:

• Depreciation:
  • HVAC systems are generally considered capital improvements, depreciated over a set recovery period as part of the building.
• Repairs vs improvements:
  • Smaller repairs (fixes, maintenance, minor parts) may be currently deductible as expenses.
  • Full system replacements and major upgrades are usually capitalized (spread over years).
• Potential Section 179 / bonus depreciation (in some cases):
  • Depending on the property type and your situation, your CPA may consider accelerated depreciation strategies for certain kinds of property.

While this isn’t as “flashy” as a headline tax credit, the real after-tax cost of a new HVAC system in a rental may be much lower than the sticker price once depreciation and other deductions are considered.

That’s why for landlords, the conversation is often:

“I may not get the same homeowner energy credit, but I still get to write this off over time as part of my rental business.”

3. Mixed-Use Properties: When You Live in Part of It

A lot of Bay Area owners have:

• A duplex, triplex, or fourplex where they live in one unit and rent the others
• A house with an ADU they rent out
• A home that’s partly used as personal residence and short-term rental

In these cases, you often have:

• A personal-use portion (your home)
• A rental/business portion (the units you rent)

If you install a new qualifying heat pump or high-efficiency system serving the whole building, your CPA may:

• Treat a portion of the cost as eligible for homeowner energy credits (the part that serves your own residence), AND
• Treat the rental portion as a business improvement (depreciation/deduction).

The split can be based on square footage, duct zones, or other reasonable methods.

This is exactly the kind of nuance that makes a good CPA valuable for Bay Area house hackers and multi-unit owners. From the HVAC side, we help by:

• Providing clear model numbers and efficiency ratings
• Itemized invoices showing equipment and labor
• Documentation your tax advisor can use to evaluate eligibility

4. State & Local Rebates for Rentals

Even if federal homeowner tax credits are limited for rentals, state and local programs often care more about:

• Type of equipment (heat pump vs gas furnace, efficiency ratings)
• Location of the property (zip code, utility territory)
• Income/usage profile of the occupant (sometimes landlord, sometimes tenant)

Examples of things that may be available in the Bay Area (these programs come and go):

• Utility or air district rebates for:
  • Heat pumps replacing gas furnaces or wall heaters
  • Heat pump water heaters
  • Electrical panel upgrades for electrification
• City or county programs promoting electrification or air quality improvements

For rentals, it’s common that:

• The property owner applies if they are paying for the upgrade, or
• The tenant may be the applicant if they’re the account holder and paying for the upgrade.

Programs also change frequently: some are active, some are paused or fully subscribed. That’s why, when you call us, we usually say:

“We’ll check what’s currently available and point you to the best up-to-date resources. Then your CPA can help you with the tax side.”

5. Practical Tips for Bay Area Rental Owners Considering HVAC Upgrades

Here’s how to approach it smartly:

Step 1: Clarify How the Property Is Used

Ask yourself:

• Is this 100% rental, or do I live in part of it?
• Is any portion used as my personal residence?
• Are there separate systems for units, or one shared system?

This matters a lot for tax treatment and for how we design the HVAC solution.

Step 2: Talk to Your CPA Before You Finalize the Plan

Run questions like these by your tax advisor:

• “If I install a new heat pump or high-efficiency system in my rental, how will this be treated for tax purposes?”
• “Does any part of this project qualify for energy credits based on how I occupy the property?”
• “Should I treat this as capital improvement with depreciation, and are there any accelerated depreciation options?”
• “Are there any special rules for mixed-use properties (duplex with one unit owner-occupied, etc.)?”

You want your HVAC design and tax strategy aligned, not in conflict.

Step 3: Design the Right System (Not Just the Cheapest)

From a long-term owner perspective, you care about:

• Reliability (fewer emergency calls from tenants)
• Energy efficiency (lower bills, happier tenants, better rentability)
• Future-proofing (heat pumps, ductless, dual fuel where appropriate)
• Comfort and noise (to reduce complaints & turnover)

Sometimes that means:

• High-efficiency heat pumps instead of just swapping a furnace
• Ductless mini splits in problem areas or ADUs
• Dual fuel systems for flexibility in the next decade
• Panel upgrades to handle future loads (EVs, more electric appliances)

Your CPA can help you understand how you’ll recover that investment over time through rent, lower maintenance, and tax treatment.

Step 4: Check Rebates & Financing as a Bonus Layer

In addition to tax treatment, you can explore:

• Rebates for qualifying equipment in your property’s location
• Third-party financing (including energy-focused options) to spread the cost over time

Even as a landlord, you may be able to use certain energy-efficiency financing programs for heat pumps and electrification upgrades—subject to eligibility and lender approval.

6. FAQ: Rental Properties & HVAC Tax Credits

Q: Can I get the same federal heat pump tax credit on my rental as I can on my own home?

A: Usually not. Pure rental properties are typically treated as business assets, not personal residences, so they don’t get the same homeowner energy credit treatment. The cost is often recovered via depreciation and deductions instead. Mixed-use properties (you live in part of it) can be more nuanced—talk to your CPA.

Q: If I live in one unit of a duplex and rent the other, can I still get a credit?

A: Potentially on the portion that serves your residence. The rental portion is usually handled as a rental improvement. Your CPA can help you decide how to allocate the cost between personal and rental use.

Q: Are there any benefits at all if I can’t get a homeowner tax credit?

A: Yes. As a landlord, you may be able to:

• Depreciate the HVAC system as a capital improvement
• Deduct repairs and maintenance
• Access certain rebates and utility incentives

The overall economics can still be favorable, especially if it improves rentability and reduces maintenance calls.

Q: Do rebates care if it’s a rental or not?

A: Many rebates care more about equipment type, efficiency, and location than about owner-occupied vs rental. Some programs do have specific rules, and some prioritize lower-income or certain customer types. Always check the current program requirements.

Q: Will Galaxy fill out my tax forms?

A: No. We’ll provide:

• Model numbers, efficiency ratings, and invoices
• Any documentation required by rebate programs

Your tax professional uses that to determine what, if any, credits or deductions apply on your return.

7. Thinking About an HVAC Upgrade in Your Bay Area Rental?

If you own rental property in Contra Costa, Alameda, or San Francisco counties, an HVAC upgrade can be:

• A comfort upgrade for tenants
• A maintenance and reliability upgrade for you
• A smart move for energy efficiency and long-term property value

Galaxy Heating & Air Conditioning can:

• Evaluate your existing system, ducts, and electrical panel
• Recommend options: high-efficiency heat pumps, ductless, or traditional systems, depending on the property
• Provide clear documentation (model numbers, ratings, invoices) your CPA and rebate programs will need
• Discuss financing and current incentive possibilities so you understand the full picture

📞 Call or text (925) 578-3293

💬 Or contact us through our website to schedule a no-pressure consultation

We’ll help you design an HVAC upgrade that makes sense for your tenants, your budget, and your long-term investment plan—and give you the paperwork your tax pro needs to handle the rest .