HVAC & Plumbing Contractors NAICS 238220

Aug 9, 2025 - New Tax & Spending Law Cuts Tax Incentives for HVAC Upgrades

• A budget reconciliation law signed by President Trump in July includes provisions that will prompt an early sunset of tax credits for several types of residential energy efficiency improvements. The Biden-era Inflation Reduction Act (IRA) incentivized homeowners to make energy efficiency improvement, including HVAC heat pumps. The tax credits and rebates were set to be in place for 10 years, but the budget reconciliation law of 2025 ends the tax credits at the end of this year. The IRA also made permanent 179D tax deductions for energy efficiency upgrades for commercial buildings, including more efficient HVAC systems. The new law eliminates 179D tax deductions effective June 30, 2026.
• Home remodeling spending growth is expected to remain flat in 2025 and the first half of 2026, according to the Leading Indicator of Remodeling Activity (LIRA) report by the Joint Center for Housing Studies at Harvard. Homeowner improvements and repairs are expected to increase 2% to $509 billion in the third quarter of 2025 compared to Q3 2024. In the fourth quarter of 2025, remodeling spending will rise quarter-over-quarter to $511 billion, up 1.8% from Q4 2024. Spending will increase to $524 billion in Q1 2026, up 2.2% from Q1 2025. In the second quarter of 2026, year-over-year spending is forecast to rise 1.2% to $518 billion. Joint Center expects a weak housing market to put downward pressure on remodeling spending. However, recent federal cuts to incentives for efficiency improvements may spur short-term growth as homeowners make upgrades before benefits expire at the end of the year.

• The total value of construction put in place declined by 0.4% in June 2025 compared to May, according to the US Census Bureau. Residential construction spending fell 0.7% in June, but spending on nonresidential building projects was mixed. Growth was led by a 1.1% uptick in lodging spending, followed by educational (up 0.2%), and amusement and recreation (+0.2%). However, several segments in the nonresidential building construction subsector saw spending fall in June, including office (down 1.2%), commercial (-0.7%), manufacturing (-0.5%), and healthcare (-0.2%). Associated Builders and Contractors (ABC) Chief Economist Anirban Basu said, “Nonresidential construction spending declined in June and has now contracted in 6 of the past 7 months.” He went on to say, “While ABC members remain optimistic about the second half of the year, according to ABC’s Construction Confidence Index, recent data pertaining to both the construction industry and the broader economy suggest weakness could persist in the months to come.”
• North American construction and engineering spending in 2025 is expected to grow by 1% after increasing an estimated 7% in 2024, according to FMI’s third-quarter 2025 North American Engineering and Construction Outlook. Nonresidential building construction spending is forecast to rise 1% in 2025, led by growth in data centers (up 32% over 2024 spending), amusement and recreation (+6%), educational (+4%), and transportation (+4%). Nonresidential building construction spending will be tempered by weakness in warehouse (down 5% compared to 2024 spending), commercial (-4%), lodging (-3%), and manufacturing (0%). Amid high mortgage interest rates and a lack of affordability, single-family construction spending is forecast to rise by 1% in 2025. A recent jump in new apartment supply and unfavorable cost conditions will reduce multifamily spending by 9% in 2025.