If you look up AC rebates in Maryland for 2026, you’ll run into a ton of supposedly helpful advice that's actually out of date. Several of the most-read articles still describe the federal Section 25C tax credit as if it’s waiting for you, and most blend heat pump electrification incentives with a plain central air conditioner swap until the two are nearly indistinguishable. The result is a homeowner who either expects money back that isn’t coming or passes on incentives that genuinely are.
We’ve been installing and replacing HVAC systems in Gaithersburg homes since 1982. As a Carrier Factory Authorized Dealer, we work through Pepco’s rebate programs regularly and have watched the incentive landscape shift considerably over the past year. What follows is a clear account of where costs and rebates actually stand right now.
What a Central Air Conditioner Replacement Actually Costs
A like-for-like central air conditioner replacement (meaning a new system dropped into existing ductwork) typically runs between $3,500 and $14,000 in the Gaithersburg area. Tonnage is the single biggest driver: a 2-ton system for a smaller home sits toward the lower end, while a 5-ton unit in a larger two-story house approaches the upper end. The SEER2 rating (Seasonal Energy Efficiency Ratio 2, the current federal efficiency measurement standard for central air) also moves the price, since higher-efficiency systems carry higher equipment costs that are partially recovered through lower monthly utility bills.
Homes with systems installed before 2010 face a separate consideration. Units that age often run on R-22 refrigerant, which was phased out of new equipment production in 2020. Because R-22 is no longer manufactured for new systems, repair costs for leaking units have climbed steeply. When a repair estimate approaches or exceeds $1,500, the math tends to favor replacement.
One cost that surprises homeowners is ductwork. The base replacement estimate assumes existing ducts are in serviceable condition. If ducts are leaking significantly or undersized for a higher-efficiency unit, or damaged, repairs are quoted separately and can add $500 to $3,000 to the total project depending on extent and access.
The Federal Tax Credits Homeowners Keep Hearing About Are Gone
The Section 25C Energy Efficient Home Improvement Credit was a meaningful incentive while it lasted. Under the rules in effect through the end of 2025, it offered up to $2,000 for qualifying heat pumps and up to $1,200 for other qualifying efficiency improvements, including high-efficiency central air conditioners. That credit doesn’t apply to equipment placed in service after December 31, 2025. IRS guidance issued following the passage of the One Big Beautiful Bill Act confirmed the expiration, and there’s currently no reinstated version. If you see a competitor or a rebate aggregator site still listing 25C as available for 2026 installations, that information is outdated.
The same law also ended the Section 25D Residential Clean Energy Credit (the 30% credit that previously covered geothermal heat pump installations) for expenditures made after December 31, 2025.
Two carve-outs are worth noting:
- 2025 installations: If a qualifying system was installed and placed in service on or before December 31, 2025, the 25C credit is still claimable on your 2025 federal tax return using IRS Form 5695. Homeowners who completed a qualifying geothermal installation by that same deadline may also claim the 25D credit on their 2025 return.
- Geothermal heat pumps: No federal residential tax credit currently applies to geothermal systems installed in 2026. Homeowners considering geothermal should consult a tax advisor about any state-level incentives that may still be available.
Presidential Heating, Air Conditioning & Plumbing serves Gaithersburg and the surrounding Montgomery County area as a Carrier Factory Authorized Dealer, with discounts for seniors, veterans, and first responders and financing options for qualifying projects. Reach us at (301) 719-3315 to get an honest picture of what your replacement would cost and which rebates apply.
Rebates Still Available Through Pepco & EmPOWER Maryland
Pepco, the electric utility serving Montgomery County, administers EmPOWER Maryland rebates for residential HVAC equipment. These rebates are still active and still meaningful. The key is understanding which pathway applies to your project.
Equipment Rebates for Central AC
For a straightforward AC replacement, Pepco’s midstream rebate structure is the most practical option. Rebates are applied through participating contractors at the point of sale rather than requiring a separate homeowner claim after installation. The system must meet minimum SEER2 efficiency thresholds to qualify, and AHRI certification (a third-party rating from the Air-Conditioning, Heating, and Refrigeration Institute that confirms a matched system’s actual performance) is typically required documentation.
Home Performance with ENERGY STAR
This pathway gets attention because the rebate ceiling sounds dramatic: up to $15,000 covering as much as 75% of project cost. That level is reserved for full electrification projects, specifically replacing a fossil-fuel heating system with a heat pump. A like-for-like central air swap doesn’t reach those figures. The Home Performance pathway also requires a BPI-certified home energy audit before work begins, and pre-approval is generally required before installation.
What the 2026 Utility RELIEF Act Means for Rebate Timing
Governor Wes Moore signed the Utility RELIEF Act into law on May 12, 2026, and it directly affects the rebate pool behind the programs described above. The law reduces Maryland’s EmPOWER annual efficiency targets from 2.5% down to 1.75% for 2027 through 2029 before scaling back up toward 2036. The immediate effect is a lower EmPOWER surcharge on utility bills, offset by a one-time $100 million state contribution. The longer-term effect is a smaller funding pool behind EmPOWER rebates starting in 2027.
This matters for timing. EmPOWER rebate structures reset with each new program cycle, and 2026 is the final year of the current cycle. Equipment installed and rebates claimed within this cycle lock in the incentive levels in place today. Homeowners who wait past the 2026 cycle close are taking on real uncertainty about whether 2027 rebate levels will match or fall below what’s available now. Based on the funding trajectory set by the Utility RELIEF Act, assuming higher levels in 2027 carries genuine risk.
Montgomery County Programs Worth Knowing
Two county-level programs add to the picture, but they work very differently from each other.
Property Tax Credit
Montgomery County offers up to $250 in county property tax credits for qualifying heating and cooling equipment upgrades, separate from any Pepco or EmPOWER rebate. This credit is available regardless of which licensed contractor performs the work. Applications are processed in the order they’re received, with total annual county funding capped at $100,000, so submitting promptly after installation is worth the effort.
Electrify MC Pilot
The Electrify MC program offers $1,000 to $2,500 toward a heat pump. That range is compelling, but the program has a hard constraint most coverage skips: the work must be coordinated and completed by the county’s single designated contractor, Elysian Energy. Homeowners who want to use their own HVAC contractor don’t qualify for this specific incentive. It’s a legitimate program worth exploring if a heat pump is the direction you’re heading, but it isn’t stackable with contractor-of-your-choice rebate claims.
Putting the Numbers Together
A realistic picture for a Gaithersburg homeowner replacing a central air conditioner in 2026 might look like this: a mid-range system installed for $6,500 to $8,500, a Pepco midstream rebate applied through a participating contractor, and a $250 Montgomery County property tax credit filed after installation. If the project qualifies under the Home Performance pathway, a larger rebate may apply. That requires the pre-audit and pre-approval steps first.
For homeowners considering a move to a heat pump rather than a straight AC replacement, the calculus involves the Electrify MC constraint and the tighter EmPOWER funding picture coming in 2027. Those are different conversations than a plain AC-for-AC swap, and they’re worth sorting out before any contractor conversation starts.
Financing closes the remaining gap for many households. Options like the Maryland Clean Energy Advantage Loan are structured for efficiency upgrades, and we offer financing plans designed to fit different budgets so a replacement project doesn’t have to wait for a convenient moment.
Acting within the current EmPOWER cycle preserves access to today’s rebate levels before the 2027 funding reduction takes effect.