Heat Pump Tax Credit 2026: 25C Ended. Here Are the Rebates Left

What ended: 25C and 25D

Until the end of 2025, heat pumps had two federal tax credits, and which one you got depended on the type of system. Air-source heat pumps used the Energy Efficient Home Improvement Credit (25C): 30% of cost, capped at $2,000 a year. Geothermal (ground-source) heat pumps used the Residential Clean Energy Credit (25D): 30% with no dollar cap, the same credit solar used.

The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, ended both. The Inflation Reduction Act had scheduled them to run into the 2030s; the new law cut them off after 2025.

Two pieces of the old landscape are still standing. The IRA's Home Energy Rebates (HEAR and HOMES, $8.8 billion in total) were not repealed. And state and utility programs, which never depended on the federal credit, keep running. For most households installing in 2026, those are now the whole game.

The cutoff rule: placed in service vs completed

The two credits used slightly different wording, but the practical effect is the same: the date that matters is when the work was done, not when you signed or paid.

• 25C (air-source): no credit for property placed in service after December 31, 2025. A heat pump is placed in service when it is installed and ready to run.
• 25D (geothermal): no credit for expenditures made after December 31, 2025, and an expenditure counts as made when the installation is completed.

So a deposit paid in November 2025 for a heat pump that was commissioned in January 2026 earns nothing federally. If your install was close to the line, keep the installer's dated final invoice, the startup or commissioning record, and any permit sign-off. Those documents are what show the system was finished in 2025.

Installed in 2025? How to still claim

If your heat pump went in during 2025, the credit is still yours. You claim it on your 2025 federal return using IRS Form 5695:

1. Air-source heat pump or heat pump water heater: Part II of Form 5695 (25C). 30% of cost, up to $2,000 for heat pumps, heat pump water heaters and biomass equipment combined. Other improvements such as insulation, windows and doors shared a separate $1,200 limit, and a home energy audit had its own $150 limit.
2. Geothermal heat pump: Part I of Form 5695 (25D). 30% of the full installed cost, including the ground loop, with no cap.
3. Carry the result to Schedule 3 and Form 1040.

A few rules decide how much of that you actually keep:

• 25C does not carry forward. It is non-refundable and any amount above your 2025 tax liability is lost. If you owed $1,200 in federal tax for 2025, a $2,000 credit gives you $1,200.
• 25D does carry forward. Unused geothermal credit rolls into future years, and that carryforward is still usable after the credit ended.
• The equipment had to meet the efficiency requirement. For 25C, air-source heat pumps needed to meet the CEE highest efficiency tier for your region. Keep the manufacturer's certification with your records.

Already filed without it? File Form 1040-X with a completed Form 5695. You can generally amend within three years of the date you filed the original return. On a $16,000 install, that is up to $2,000 back for an hour of paperwork.

Geothermal lost the biggest credit

Of all the home energy changes, geothermal took the hardest hit in dollar terms. Because 25D had no cap, the credit on a typical $18,000–$45,000 geothermal system ran from about $5,400 to $13,500. That was often the reason geothermal penciled out at all.

Geothermal still has the lowest running costs of any heating system, and a ground loop lasts for decades. But at full price, the payback stretches out considerably, and for many households it is now harder to justify over a cold-climate air-source heat pump. If you are still considering geothermal, look for state or utility geothermal programs, check whether your state's HOMES program rewards the energy savings, and compare it head to head with air-source using our ground-source vs air-source guide and the Geothermal Calculator. Our geothermal drilling guide covers where the loop cost comes from.

HEAR rebates: still alive, state by state

The biggest piece of federal heat pump money left in 2026 is not a tax credit at all. The Home Electrification and Appliance Rebates (HEAR) program, sometimes called HEEHRA, was funded by the Inflation Reduction Act and was not repealed by the OBBBA. Each state runs its own version with federal money, so the timing, the application process and which contractors can offer it differ by state. Some states have launched; others are still setting up or have limited funds.

How much of your project it covers depends on household income compared with your area median income (AMI):

• At or below 80% of AMI: up to 100% of the project cost, up to each measure's cap.
• Between 80% and 150% of AMI: up to 50% of the project cost, up to each cap.
• Above 150% of AMI: not eligible for HEAR.

HEAR is usually applied as a point-of-sale discount through a participating contractor, so it comes off your bill rather than arriving at tax time. That is why it works for households with little or no federal tax liability, who never got much from 25C anyway. To see whether your state's program is open, start at energy.gov/save/rebates, then go to your state energy office's page.

HOMES whole-home rebates

The other surviving IRA program, HOMES (Home Efficiency Rebates), pays based on how much energy a whole-home project saves, measured or modeled. Unlike HEAR, it is open across income levels, with larger amounts for lower-income households. A heat pump that replaces an oil or propane system, combined with air sealing and insulation, is the kind of project HOMES is built to reward.

Like HEAR, HOMES is run by each state, and availability varies. Some states run HOMES and HEAR together; some have launched one before the other. Your state energy office will say which programs are live and whether they can be combined on the same project.

State programs that matter most

In many states the state program is now the largest single incentive, especially for households above the HEAR income limits. The strongest programs are concentrated in the Northeast and West:

• Massachusetts (Mass Save): whole-home heat pump rebates that have historically reached up to $10,000, among the richest in the country.
• New York (NYS Clean Heat, through utilities): per-ton rebates that can total several thousand dollars.
• Maine (Efficiency Maine): per-unit rebates with added amounts for low-income households; Maine leads the country in heat pump adoption.
• Vermont, Connecticut, Rhode Island, New Hampshire: utility and efficiency-program rebates, often $500–$2,000 or more per system.
• California (TECH Clean California): statewide heat pump incentives plus utility rebates.
• Oregon (Energy Trust of Oregon) and Washington: strong utility and state rebates.
• Colorado: a state heat pump tax credit plus utility rebates.
• Nevada: utility rebate programs through NV Energy.

These programs set their own rules and budgets and can change mid-year, so check the current terms before you sign a contract. Our heat pump rebates by state guide goes region by region.

Utility rebates

Your electric utility, and sometimes your gas utility, very likely runs an efficiency rebate program. Heat pump rebates commonly range from a few hundred dollars to over $2,000 per system, often structured per ton of capacity or tied to a minimum efficiency rating. Some utilities add money for a smart thermostat or for enrolling in a demand-response program that cycles the heat pump during peak hours.

Utility rebates are usually the easiest incentive to collect: a participating contractor applies them at the point of sale or you submit a short form after installation. They are also the most often missed, because they rarely make the news. Check your utility's website before you request quotes, and ask every contractor which rebates they process. The ENERGY STAR rebate finder and the DSIRE database list many of them by ZIP code.

Heat pump water heaters

A heat pump water heater uses roughly a third of the energy of a standard electric tank. Through 2025 it shared the 25C $2,000 limit; for 2026 installs that credit is gone too. What remains: HEAR covers up to $1,750 for income-qualified households, and many utilities pay their own water heater rebates, sometimes several hundred dollars. If you are already replacing your heating system, pricing a heat pump water heater at the same time lets you apply for both rebates in one round. Our heat pump water heater cost guide covers prices and savings.

Cold-climate math without the credit

The question most people actually have: does a heat pump still make sense in a cold state now that the federal credit is gone? Take a $16,000 ducted cold-climate heat pump in a Northeast home that heats with oil or propane. The table compares a 2025 install with a 2026 install for two households.

For the higher-income household, losing 25C adds $2,000 to the net cost. If the heat pump saves $900 a year compared with oil, simple payback moves from about 12.8 years to 15 years. That is a real change, but not a deal-breaker for a system expected to last 15–20 years, and the comparison improves sharply if you were going to replace a failing furnace and central air anyway. In that case the fair comparison is the extra cost of the heat pump over a new furnace and AC, not the full $16,000.

For the income-qualified household, the federal credit barely mattered in the first place. HEAR plus state and utility rebates bring the price to $5,500, and the payback is around six years at the same savings. That household's priority is simple: confirm the state HEAR program is open and find a participating contractor.

Running costs depend heavily on your electricity and fuel prices. Plug in your own numbers with the Heat Pump Savings Calculator and the Heat Pump Cost Calculator, which now default to a $0 federal credit. For cold-climate equipment choices, see our cold-climate heat pump guide.

Geothermal math without the credit

Now take a $32,000 geothermal system. Completed in 2025, the uncapped 30% credit was $9,600, for a net of $22,400. Completed in 2026, the net is the full $32,000, before any state or utility help. That is 43% more out of pocket for the same system.

Geothermal can still make sense for long-term owners in cold climates with expensive fuel, on large homes with high heating loads, or where a state or utility funds ground loops. For most other households, a cold-climate air-source heat pump now delivers most of the efficiency for roughly half the price.

Should you wait?

There is no federal heat pump credit scheduled to come back, so waiting for one is not a plan. The timing questions that matter now are local:

• If you qualify for HEAR and your state's program is not open yet, it may be worth waiting, as long as your current system is working. Installing before the program launches usually means missing the rebate, because most states apply it at the point of sale and do not cover work done earlier.
• If your system is failing, don't sit through a winter without heat to chase a rebate. Collect the state and utility rebates available now.
• If state or utility budgets are tight, apply early in the program year. Many programs fund in annual or quarterly rounds and can run out.

2026 heat pump incentive checklist

1. Check HEAR and HOMES status for your state at energy.gov/save/rebates.
2. Find your household income as a share of AMI. Under 80% means up to 100% coverage; 80–150% means up to 50%.
3. Look up your state energy office or efficiency program and your utility's rebate page.
4. Ask each contractor which rebates they are approved to process and whether they apply them at the point of sale.
5. Get the model's efficiency ratings in writing, since state and utility rebates often require minimum ratings.
6. Compare against the cost of a replacement furnace and AC, not just against nothing.
7. If you installed in 2025, claim 25C or 25D on Form 5695, or amend with Form 1040-X if you already filed.

Common mistakes

• Trusting quotes that subtract $2,000. Any 2026 estimate showing a federal heat pump credit is out of date.
• Missing a 2025 credit. If your heat pump went in last year, the credit is still claimable. Don't leave it.
• Installing before your state's HEAR program opens. Rebates generally don't cover work done before launch.
• Ignoring utility rebates. They are often the quickest money on the table.
• Comparing a heat pump with doing nothing. If your furnace or AC needs replacing anyway, compare the extra cost of the heat pump, not the full price.
• Assuming geothermal still gets 30%. It doesn't for 2026 installs. Price it at full cost.