Guide 02 · Tax & VAT
The tax side of heating and cooling your building
VAT on a heat pump has dropped to 9%. Here's how that compares with air conditioning, and the reliefs open to landlords and businesses.
VAT on heat pumps: 9%
Since 1 January 2025, the supply and installation of a heat pump heating system is charged at the second reduced rate of VAT: 9%. Before that it was 13.5%, subject to the so called two thirds rule. Your installer's quote should already reflect the lower rate; if it shows 13.5% or 23% on a heat pump job, ask why.
VAT on air conditioning and other HVAC
| What you're buying | Typical VAT | Notes |
|---|---|---|
| Heat pump heating system, supplied & installed | 9% | Applies since 1 Jan 2025 |
| Cooling only air conditioning, supplied & installed | 13.5% or 23% | 13.5% for installation work, unless the equipment is over two thirds of the price, then 23% |
| Equipment bought on its own (no install) | 23% | Standard rate for goods |
| Servicing and repairs | 13.5% | Generally a reduced rate construction service |
Whether an air to air unit counts as a "heat pump heating system" depends on how it's used and installed. Ask your installer to confirm the rate against Revenue's guidance before you sign.
Not sure what you need?
See each system inside a home like yours, with what it does and what it costs.
Landlords: retrofit expense deduction
Landlords can deduct qualifying retrofitting costs, including a heat pump, from rental income, up to €10,000 per rental property, where the work is supported by an SEAI grant. The relief is time limited, so check the current end date with Revenue.
Businesses: write off the cost in year one
Under the Accelerated Capital Allowance (ACA) scheme, companies can deduct 100% of the cost of qualifying energy efficient equipment, including heat pumps and HVAC equipment on SEAI's Triple E register, against profits in the year of purchase, instead of over eight years. Commercial, agricultural and public buildings may also qualify for SEAI's Support Scheme for Renewable Heat.
Your BER and why it matters financially
A Building Energy Rating is required when you sell or let a home. A heat pump typically lifts a BER by several grades, which helps resale value, unlocks green mortgage rates at some lenders, and is the measure lenders use to approve a Home Energy Upgrade Loan.
This is a guide, not tax advice