Heat Pump Tax Credit 2026: What Happened to 25C and What Replaced It

Is there a heat pump tax credit in 2026?

No. The federal heat pump tax credit (Section 25C, worth up to $2,000) does not apply to heat pumps placed in service after December 31, 2025. It was ended early by the One Big Beautiful Bill Act, signed July 4, 2025. If your heat pump was installed and running by the end of 2025, you can still claim it on your 2025 return. For 2026 installs, the money now comes from state-run rebates (HEAR, now called HEEHR: up to $8,000 for income-qualified households upgrading from electric heat — since September 2026 it no longer covers replacing gas, oil or propane systems), state programs and utility rebates.

Status checked November 1, 2026.

Federal heat pump incentives: what’s left

Incentive	What it was / is	Status for 2026 installs
25C Energy Efficient Home Improvement Credit	30% of cost, up to $2,000/year for heat pumps and heat pump water heaters	Ended — not available for property placed in service after Dec 31, 2025
25D Residential Clean Energy Credit	30% of cost for geothermal heat pumps (and solar, batteries)	Ended — not available for expenditures after Dec 31, 2025
HEAR / HEEHRA rebate	Up to $8,000 for a heat pump, $1,750 for a heat pump water heater, $4,000 for a panel upgrade; income limits apply	Available where your state’s program is open; electric-to-electric upgrades and new construction only since September 2026
HOMES rebate	Rebates based on whole-home energy savings	Available in some states
State and utility rebates	Varies widely	Available — not affected by the federal change

What happened to the 25C credit?

The 25C credit has existed in some form since 2005. The 2022 Inflation Reduction Act expanded it to 30% of project costs and extended it through 2032. For heat pumps, that meant up to $2,000 back every year, with no income limit, and labor counted toward the cost.

The One Big Beautiful Bill Act (Public Law 119-21) moved that end date up by seven years. Under IRS guidance, 25C isn’t allowed for property placed in service after December 31, 2025, and 25D ended for expenditures after that date (IRS, IR-2025-86 and Fact Sheet 2025-05).

What “placed in service” means: the system has to be installed and working. Paying a deposit, signing a contract, or buying equipment in 2025 doesn’t count if the installation finished in 2026. For 25D (geothermal), the IRS treats the expenditure as made when installation is complete, so prepaying in 2025 didn’t preserve the credit either.

Will the 25C credit come back?

Not as of this update. In September 2025, a group of House Democrats argued that the law amended the wrong subsection of the tax code and that 25C should legally run through 2032. The IRS has not adopted that view, and HVAC trade groups advised contractors and homeowners not to count on it (ACHR News). Unless Congress passes new legislation, don’t budget for a federal tax credit on a 2026 heat pump. We’ll update this page if that changes.

Watch for outdated advice. Many contractor ads, manufacturer pages and older articles still advertise the $2,000 credit. If a quote subtracts a federal tax credit from the price of a 2026 install, ask the contractor to remove it.

Installed a heat pump in 2025? You can still claim it

If your system was installed and running by December 31, 2025, the 25C credit still applies — you claim it on your 2025 federal return.

How much it’s worth

Item	25C limit (2025 installs)
Heat pumps and heat pump water heaters	30% of cost, up to $2,000 per year
Central AC, furnaces, boilers, insulation, windows, doors, panel upgrades, energy audits	Shared $1,200 per year cap (with smaller per-item limits)
Maximum total per year	$3,200

The credit covers equipment and installation labor. It’s nonrefundable: it reduces the tax you owe, but you don’t get a refund beyond that, and unused amounts don’t carry forward.

How to claim it

Confirm the equipment qualified. It had to meet the Consortium for Energy Efficiency (CEE) highest efficiency tier (not including “advanced” tiers) in effect at the start of 2025. Ask your installer for the manufacturer’s certification statement.
Get the product identification number (PIN). For property placed in service in 2025, the IRS requires a PIN from a qualified manufacturer on your return. Your installer or the manufacturer can provide it.
Gather your paperwork: itemized invoice (equipment and labor), installation date, and any rebates you received. Rebates that reduce your cost generally reduce the amount you can claim.
Complete IRS Form 5695, Part II (Energy Efficient Home Improvement Credit) and attach it to your 2025 Form 1040.
Keep records for at least three years.

Missed it on your 2025 return?

The regular 2025 filing deadline was April 15, 2026, and the extended deadline was October 15, 2026. If you filed but forgot the credit, you can generally file an amended return (Form 1040-X with Form 5695) within three years of your original filing date. Talk to a tax professional — we’re not tax advisors, and your situation may differ.

Installed in early 2026 but paid in 2025? Unfortunately that doesn’t qualify. What counts is the date the system was placed in service, not when you paid.

What replaced the heat pump tax credit

Nothing replaced 25C one-for-one, but the 2026 incentive picture isn’t empty. The key difference: most remaining money comes as rebates at the time of purchase, run by states and utilities, and much of it depends on income and where you live.

1. HEAR rebates (HEEHRA) — the biggest federal money left

The Home Electrification and Appliance Rebates program (also called HEEHRA, or HEEHR by the Department of Energy) was funded by the Inflation Reduction Act as grants to states. Because that money was already sent to state energy offices, the 2025 law didn’t cancel it.

Household income (vs area median)	Rebate coverage
Below 80% of area median income	Up to 100% of project cost, within caps
80–150% of area median income	Up to 50% of project cost, within caps
Above 150%	Not eligible

Upgrade	Maximum HEAR rebate
Heat pump for heating and cooling	$8,000
Heat pump water heater	$1,750
Electrical panel upgrade	$4,000
Electrical wiring	$2,500
Insulation, air sealing, ventilation	$1,600
Total per household	$14,000

The catch: each state runs its own program, on its own timeline. As of mid-2026, more than 20 states had launched, but rollout has been uneven (Aurora Solar). California’s single-family program was fully reserved and waitlisted in February 2026 (Filterbuy). Rebates are usually applied at the point of sale through an approved contractor, so you don’t wait for a refund.

The 2026 rule change: in May 2026, DOE’s Program Notice 26-2 limited these rebates to upgrading existing electric equipment (electric furnaces, baseboards, older heat pumps) to more efficient electric equipment, plus new construction. Since September 1, 2026, HEAR no longer pays to replace a gas, oil or propane furnace or boiler with a heat pump (DOE Program Notice 26-2). See our full HEAR explainer for details.

2. HOMES rebates — for whole-home efficiency projects

The HOMES program pays based on the energy savings a whole-home upgrade achieves, measured or modeled by an energy assessment. A heat pump can be part of a qualifying project, often combined with insulation and air sealing. Amounts are larger for lower-income households. Like HEAR, it’s run by state energy offices and only available where launched.

3. State programs

Several states fund heat pump rebates on their own, regardless of the federal changes. Well-known examples include Mass Save (Massachusetts), NYS Clean Heat (New York), Efficiency Maine, Efficiency Vermont and Energize CT (Connecticut). Colorado has its own state heat pump tax credit. Amounts and rules change often, so check each program’s site.

4. Utility rebates and credits

Many electric utilities offer heat pump rebates (often a few hundred to a few thousand dollars) and ongoing demand-response credits for letting them adjust your thermostat at peak times. These are paid whether or not you qualify for HEAR.

5. Manufacturer and contractor promotions

Spring and fall promotions from manufacturers and local dealers often run $200–$1,500. They’re not guaranteed, but they’re common in the shoulder seasons.

6. Low-interest financing

Some states and utilities offer low- or zero-interest heat pump loans or on-bill financing. Compare those with contractor financing, which can carry higher equipment prices.

Before and after: how the numbers changed

Example: a $12,000 variable-speed heat pump install.

Scenario	Federal help	Net cost
Installed in 2025 (any income)	25C tax credit: $2,000	~$10,000 (after filing taxes)
Installed in 2026, replacing electric heat, income under 80% AMI, state HEAR open	HEAR rebate: $8,000	~$4,000 (at purchase)
Installed in 2026, replacing electric heat, income 80–150% AMI, state HEAR open	HEAR rebate: $6,000 (50%)	~$6,000
Installed in 2026, income above 150% AMI	None	~$12,000, minus any state or utility rebates

For many middle- and lower-income households, the 2026 picture is better than the old tax credit — but only if their state’s program is open and they’re replacing electric heat or building new. Households heating with gas, oil or propane lost HEAR for furnace replacements in September 2026. Higher-income households lost the most.

How to find and claim heat pump incentives in 2026

Check your state’s HEAR status. Search “[your state] home energy rebates” or visit your state energy office. Note whether the program is open, waitlisted or not yet launched.
Check your income tier. HEAR uses area median income (AMI) for your county and household size. Most state portals have an eligibility checker.
Look up utility and state rebates. Check your electric utility’s rebate page, plus the DSIRE database (dsireusa.org) for state programs.
Ask installers which programs they’re approved for. Many rebates are paid only through enrolled contractors, at the point of sale.
Confirm the equipment qualifies before you sign. Programs often require ENERGY STAR certification, a specific efficiency tier, or cold-climate certification.
Get pre-approval if required. Some programs reject rebates for work that started before approval.
Keep everything: the itemized quote, invoice, model numbers, AHRI certificate and approval letters.

Is a heat pump still worth it without the tax credit?

For many homes, yes. The $2,000 credit was helpful, but it was rarely the deciding factor:

Replacing a dying AC? A heat pump typically costs only $2,000–$3,000 more than a new AC alone, and it adds efficient heating.
Heating with propane, oil or electric baseboards? Annual heating savings of several hundred dollars or more can pay back the cost difference in a few years.
Income-qualified in a HEAR state? If you heat with electric resistance or an old heat pump, rebates of $6,000–$8,000 can make a new heat pump cheaper than a like-for-like replacement.
Cheap natural gas and a working furnace? The case is weaker on bills alone; consider a dual-fuel system when your AC needs replacing.

See our guide on whether a heat pump is still worth it without the federal credit for the full math.

Frequently asked questions

Is there a federal tax credit for heat pumps in 2026?

No. The 25C credit ended for heat pumps placed in service after December 31, 2025. Income-qualified households replacing electric heat may get up to $8,000 through state-run HEAR (now HEEHR) rebates, and many states and utilities offer their own rebates.

When did the heat pump tax credit end?

It ended for systems placed in service after December 31, 2025. The One Big Beautiful Bill Act, signed July 4, 2025, moved the end date up from 2032.

Can I still claim the heat pump tax credit for a 2025 installation?

Yes, on your 2025 federal return using Form 5695. If you’ve already filed without it, you can generally amend with Form 1040-X within three years.

Is the geothermal tax credit still available in 2026?

No. The 25D credit, which covered 30% of geothermal heat pump costs, ended for expenditures after December 31, 2025. Some states and utilities still offer geothermal rebates.

Can I get both a HEAR rebate and a state rebate?

Often, yes, but rules vary. Some states let you stack HEAR with state and utility rebates; others limit combined incentives to the project’s cost. Ask your state program or installer.

Can I get the HEAR rebate to replace a gas furnace?

No, not since DOE’s Program Notice 26-2 took effect (states had to comply by September 1, 2026). HEAR now covers electric-to-electric upgrades and new construction. Some states may allow a rebate when you add a heat pump and keep your furnace; check your state’s rules.

Will the 25C credit be extended or restored?

Not as of this update. A technical argument that the credit legally continues through 2032 has not been adopted by the IRS. Any restoration would require new action from Congress.

Related guides

HEAR (HEEHRA) Heat Pump Rebate Explained: Income Limits and Amounts
How to Check Whether Your State’s HEAR Rebate Program Is Open
How to Claim a 2025 Heat Pump Tax Credit on Form 5695
Is a Heat Pump Still Worth It Without the Federal Tax Credit?
Heat Pump Installation Cost in 2026: Real Prices by Home Size and System Type
Massachusetts Heat Pump Rebates 2026: Mass Save Amounts and How to Apply

This page is general information, not tax advice. ElectrifyHomeGuide isn’t a tax advisor; check with a tax professional about your situation. Rebate availability changes frequently. Status checked November 1, 2026.