2025 Updates for Houston Area Homeowners Looking for AC Replacement

Looking ahead to 2025, Houston area homeowners considering AC replacement should consider the rebates and regulatory environment surrounding the HVAC industry.

Regulations are a double-edged sword. On the one hand, new energy efficiency mandates have resulted in rebate programs at the federal and local utility level that can make make it less expensive to invest in higher-efficiency equipment.

On the other hand, tougher federal efficiency standards and refrigerant phase-downs mean that newer heat pumps and air conditioners are going to come with new technology, new refrigerant, and safety measures that will require more time for installation. These factors will surely raise the cost of AC replacement for homeowners.

Most Houston homeowners only have to purchase a new AC every decade or so, longer if you invest in regular maintenance in the fall and the spring. Here’s what to know if you may be in the market for a new AC unit in the next few months or years.

First the Good News: AC Replacement Rebates and Incentives

Tax Rebates for AC Replacement

You can take advantage of Federal Tax rebates if purchasing a new AC unit according to the U.S. Department of Energy.

Heat pumps – 30% of the cost up to $2,000 per year
Efficient air conditioners/heaters – 30% of the cost up to $600 (Subject to cap of $1200/year)

Fill out IRS Form 5695 and consult your tax preparer for additional advice.

AC Rebates Coming in 2025 to Texas Homeowners

The Federal Inflation Reduction Act (IRA) has given Texas money to incentivize homeowners to purchase energy-efficient residential appliances, including ultra-efficient heat pump systems. According to the Texas Comptroller, the U.S. Environmental Protection Agency (EPA) has earmarked $690 million towards this goal.

Texas officials expect to be ready to launch two federal rebate programs administered by the State Energy Conservation Office by mid-2025.

The HOMES Rebate Program is a performance-based whole-house energy saving retrofit program
The Home Electrification and Application Rebate (HEAR) program will help low-to-moderate income homeowners with rebates toward electrical heat pump purchases and ventilation and insulation upgrades among others.

Locally, CenterPoint Energy Houston Electric offers the following incentives:

Smart Thermostat Discount – Get a $50 coupon toward the purchase and installation of an ENERGY STAR®-certified smart thermostat. If you replace an AC unit, many of the newer units come with their own proprietary Smart Thermostat. And if you have an older AC that is well-maintained and working well, you can add a Smart Thermostat to help increase its efficiency even more.
AC Unit Replacement – If your AC unit is nearing the end of its useful life around 12-20 years and you’re thinking about replacing, you may qualify for rebates from CenterPoint if you select a higher-efficiency model. The amount available depends on your system’s size and seasonal energy efficiency ratio or SEER2. Read about SEER2 requirements and how they affect Greater Houston area homeowners.
CoolSaver Tune Up – You can apply for a rebate on your maintenance visit every 5 years, but we definitely recommend maintenance on your central air and heating system twice a year. In the fall, we inspect and optimize your heater before the winter chill arrives. In the spring, we inspect and service your air conditioner before the heat and humidity ramp up. Regular AC maintenance prevents the hassle of breakdowns, and it helps your AC unit last longer, too.

HVAC manufacturers are even making it easy to determine which AC units and heat pumps may be eligible for certain rebates or tax credits (AC units in inventory). Reach out to your local RUUD ProPartner to learn more about any other local incentives and rebates that might be going on in your area.

AC Replacement and the Increasing Demand for Heat Pumps

From meetings we have had with local AC distributors in the Greater Houston area, we can confidently say that the supply of heat pumps is going to increase in proportion to the rising demand. For those who want to electrify their appliances, heat pumps can be a great highly efficient option to replace a central air system.

Depending on the price of fuel, it may make more sense to have a duel-fuel hybrid heat pump system. A duel-fuel or hybrid system is typically a gas-fired furnace with a heat pump. With the technology today, the thermostat can pick which way to heat the home most efficiently. In our climate, hybrid heat systems are a great way to stay comfortable and save your energy dollars.

We installed two duel-fuel or hybrid heat systems in my dad’s home a few years ago. Initially, he was quite skeptical about the technology and how it would work. To his surprise, the modern, hybrid heat pumps really do a great job maintaining the indoor temperature in the winter. Only when the home gets really cold or if he needs the home to heat up really quickly does the gas-fired furnace fire up. This type of system is especially helpful for anyone whose home is using LP gas (i.e. butane or propane) because they have two options for heat in the winter and they can stretch out how often they need to refill their LP tank. Dad is probably one of our biggest advocates of this type of system now.

Factors Affecting AC Unit Replacement Prices in Houston in Q4 2024 and into 2025

AC Refrigerants – Lower Supply, Means Higher Demand

Right now, HVAC manufacturers are updating heat pumps and air conditioners that are more efficient than ever AND will use new refrigerants, primarily R-454b.

If you weren’t aware, the refrigerant used in the vast majority of AC units in the residential market is R-410A, and it is being phased out. This is the second refrigerant phasedown in the last decade or so. This means that manufacturers are not going to sell the NEW AC units, until the inventory of the older ones is depleted.

HOT TIP: You’re looking to save on a system that will last a decade or more, take advantage of this inventory transition and replace your air conditioning and heating unit now. The existing inventory will be less expensive than the new inventory that is coming.

More Technology & Safety Features on New AC Units

We anticipate that new technology will make the new more efficient AC units cost more because of additional monitoring equipment related to the new A2L refrigerants. The scuttlebutt we have heard suggests prices could rise anywhere from 10-15% or more. And that doesn’t even take into account higher labor costs for new installation guidelines for handling the new refrigerant.

We have learned it will take one to two hours longer to install the new AC units and heat pumps with the new refrigerants. The newer refrigerants will require more testing for leaks than previous refrigerants to comply with new EPA standards.

Whether someone feels that is a little “over-engineered” or not, most AC contractors are going to follow factory installation specifications to the letter. Following factory installation instructions is critical to AC units working properly and for preserving your warranty. Our company offers a 10-year labor warranty with all new complete AC installations.

PRO TIP: If you’re trying to get a sense for how an AC company works, ask them how they fulfill their warranty service. When you work with mechanical equipment, warranty service is part and parcel of the job. Gauging their reaction to this question can tell you a lot. Some companies won’t do AC warranty service. Knowing that before you buy is good to know!

Side Discharge Heat Pumps Becoming More Common

You might be familiar with the thin, suitcase-shaped outdoor units you see on mini-split systems. They have a smaller footprint and can fit in smaller places. These AC units are prized for their easy installation, high efficiency, quiet operation, and versatility. These are ductless side discharge units.

With the new AC units coming in late 2024 and early 2025, expect to see more side discharge options that are taller and thinner and will connect to your home or business’ existing ductwork. Of course, the top discharge units, those box-shaped outdoor condensers, many of us grew up with are not going away.

As a RUUD Pro Partner, we have previewed RUUD’s RD17 Heat Pump offerings which are coming soon, and we are impressed! They offer the following benefits:

A compact footprint (outdoor unit is tall/thin)
New refrigerant (R-454b)
Higher SEER2 at a lower price
Eligible for rebates/tax incentives
Can accommodate duel fuel (hybrid system) or all-electric

Our assessment is that this well-made RUUD heat pump gives you more efficiency for what it costs for electric heat. And you may be able to save money when you pair it with a gas furnace. If you’d like a dual-fuel hybrid system, this system makes stepping into that option more affordable.

Of course, there are and will be many heat pump and AC unit options when you’re ready for AC replacement. This is but one of the newer ones coming soon.

Considering AC Replacement Soon? Call Our West Houston-Based AC Company

Give West Houston AC Specialist Rob Terry, Owner of Terry’s A/C & Heating, a call at 281-495-7830 to set up a call to get your questions answered and an estimate on the AC units available that will stand the test of time through Houston’s famous heat and humidity. Learn more about our company and see the residential AC replacement and commercial AC installation services we offer from West Houston (Memorial Villages through Katy, Richmond, Sugar Land, and Fulshear).