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2025 Heat Pump Tax Credits: Maximum Savings Guide

By Travis Baugh

If you're thinking about upgrading your home's HVAC system, you may be eligible for heat pump tax credits. 

In 2025, homeowners can take advantage of significant tax credits for installing energy-efficient heat pumps, reducing upfront costs on their HVAC systems. Geothermal heat pumps qualify for tax credits of up to 30% of installation costs, while air-source heat pumps can receive credits of up to $2,000. These incentives make it more affordable than ever to upgrade your home’s heating and cooling system, offering long-term cost savings and enhanced energy efficiency. If you're considering installing a heat pump, explore how these generous tax credits can help offset installation costs and boost your home's performance. 

Learn more about heat pumps and explore financing options.

Available Heat Pump Tax Credits for 2025

Many heat pump tax credits are available to homeowners in 2025. The Energy Efficient Home Improvement Credit offers a 30% tax credit on the installation of energy-efficient heat pumps, with a maximum of $2,000 per year available for qualifying systems. The Section 25D credit for geothermal heat pumps provides homeowners with up to a 30% credit on installation costs for qualifying systems, with both primary and secondary homes eligible. To qualify for both credits, the system must be ENERGY STAR Most Efficient certified (a new requirement beginning in 2025), and homeowners will also need a Product Identification Number (PIN) for tax filing. In addition to these federal tax credits, homeowners may be able to access state and utility rebates, further increasing the cost savings of upgrading to energy-efficient systems like geothermal heating solutions. 

Energy Efficient Home Improvement Credit (Section 25C) for 2025

To help combat inflation, the Inflation Reduction Act of 2022 Tax Section 25C, Nonbusiness Energy Property Credit, provides a tax credit to homeowners equal to 30% of installation costs for the highest efficiency tier products, up to a maximum of $2,000 for qualified heat pumps. The 2025 Section 25C credit provides a 30% tax credit on eligible energy-efficient heat pump systems, with a $2,000 maximum per year. To qualify, the system must be ENERGY STAR Most Efficient certified, installed in a primary residence, and homeowners must obtain a Product Identification Number (PIN) for tax filing.

heat pump tax credit chart

Geothermal Heat Pump Tax Credit: Section 25D (2025-2034)

The Section 25D credit offers a 30% tax credit for the installation of ENERGY STAR® certified geothermal heat pumps through 2032, covering both equipment and installation costs. This credit applies to both primary and secondary homes, making it accessible for a wide range of homeowners looking to upgrade to energy-efficient geothermal systems. However, the credit percentage will decrease in future years, dropping to 26% in 2033 and 22% in 2034. Learn more about geothermal heat pump systems.

Income-Based Heat Pump Rebates Up to $8,000

The High-Efficiency Electric Home Rebate Program offers rebates of up to $8,000 for the installation of energy-efficient systems, including heat pumps, in qualifying homes. To qualify, your household income must be at or below 150% of the median income for your area. This rebate can be combined with other tax credits, providing even greater cost savings for homeowners who choose to upgrade to energy-efficient systems. Check out available financing options to help pay for your heat pump.

How to Qualify for 2025 Heat Pump Tax Credits

To qualify for the 2025 heat pump tax credit, homeowners must meet several key requirements. The system must be ENERGY STAR Most Efficient certified to ensure it meets the highest efficiency standards. Additionally, the heat pump must be installed in a primary residence and not a secondary home or rental property. A Product Identification Number (PIN) is required to complete the tax filing, ensuring the system qualifies for the credit.

Homeowners will need to collect specific documentation during professional installation to claim the tax credit. This includes the manufacturer's certificate confirming the ENERGY STAR certification, installation receipts detailing the costs, and the PIN number provided for the system. These documents must be submitted when filing for the tax credit to ensure eligibility.

Claiming Your 2025 Heat Pump Tax Credit: Step-by-Step Guide

a woman researches heat pump tax credit details on her phone
  • Step 1: Determine Your Eligibility - Ensure you meet the eligibility criteria.
  • Step 2: Gather Necessary Documentation - Collect all receipts, invoices, and manufacturer certifications as proof of purchase and eligibility.
  • Step 3: Complete IRS Form 5695 - This form is specifically for claiming the residential energy-efficient property credit.
  • Step 4: Submit Your Tax Return - Include Form 5695 when filing your federal tax return. 
The 2025 heat pump tax credit process has updated documentation requirements that homeowners must follow to claim incentives. To qualify, homeowners need to provide ENERGY STAR certification for the system to confirm it meets efficiency standards. Additionally, a unique PIN number is required for the filing process, and all receipts for installation costs must be kept. You’ll need to fill out IRS Form 5695, ensuring it reflects the correct system model and installation documentation to claim the credit.
 
To claim the tax credit, complete Form 5695 and include all necessary documentation, including proof of purchase and installation. You can combine multiple credits, such as state rebates or utility incentives, with the federal tax credit, provided they apply to qualifying systems and you don't duplicate claims on the same costs.
 
Line Item $
Heat Pump $2,250
Labor/Installation $750
Total Cost $3000
Tax Credit (30% of cost) $900
Cost Less Credit $2,100


Additional Heat Pump Savings: Local Utility Rebates

Utility rebates can be combined with federal tax credits to maximize savings on your heat pump purchase, significantly reducing overall installation costs. For example, you might qualify for up to $2,000 in tax credits for an air-source heat pump, plus an additional rebate of $500 to $1,500 from your utility provider, depending on your location and the system model. Since rebate amounts vary, it's crucial to check current offers in your area and for the specific qualifying systems you’re considering to ensure you’re taking full advantage of all available cost savings.

Get Expert Help With Heat Pump Tax Credits

Working with a Carrier Authorized Dealer ensures you’re getting expert guidance on the 2025 heat pump tax credit requirements and how to maximize available incentives. Carrier offers many systems that qualify the latest efficiency standards, and your local Carrier dealer is well-versed in the tax credits, rebates, and financing options that can help reduce your installation costs. By choosing a Carrier dealer for professional installation, you’re not only ensuring a high-quality system but also taking full advantage of the financial incentives available to make your energy-efficient upgrade more affordable. Find a qualified Carrier dealer today.

Frequently Asked Questions About Heat Pump Tax Credits

Yes, heat pumps are eligible for federal tax credits under the Inflation Reduction Act (IRA), which provides incentives for energy-efficient home improvements. Homeowners can receive a tax credit of up to 30% of the cost for installing energy-efficient heat pumps, with a maximum credit of $2,000. Reference the above chart for details.
Select heat pumps qualify for a federal tax credit. To qualify, the heat pump must meet specific energy efficiency standards set by the U.S. Department of Energy referenced in the above chart.
For a heat pump to qualify for the Inflation reduction act tax credit 25C, heat pumps must meet efficiency standards for SEER2, EER2, and HSPF2. The chart referenced above on the page shows full details on the credit.
Split ducted heat pumps and packaged heat pumps must meet a SEER2 rating of 15.2 or above. Non-ducted heat pumps must meet a SEER2 rating of 16 or above. Heat pumps must also meet EER2 and HSPF2 minimum efficiencies to qualify for the Inflation Reduction Act’s 25C tax credit.
A 15.2 SEER2 split ducted heat pump or packaged heat pump may qualify for a federal tax credit under the Inflation Reduction Act as long as EER2 and HSPF2 standards are met as well. Non-ducted heat pumps must have a SEER2 of 16 or above.
In addition to federal tax credits, many states and local utility companies offer rebates and incentives for installing energy-efficient heat pumps. Check with your state energy office or utility provider for available programs in your area.
Yes, you can claim the tax credit for replacing an old heat pump, as long as the new system meets the required SEER2, EER2, and HSPF2 efficiency standards. The credit applies to both primary home and qualifying secondary residences but does not apply to rental properties.

Learn More About Heat Pumps

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