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Federal Heat Pump Tax Credit: What Ended and What's Left

By Dana Brooks · Sources verified by the editorial team on Oct 31, 2026

This guide covers the federal credits only at a high level. It isn't tax advice; check with a tax professional about your own return. For installation prices, see our heat pump installation guide. For every local rebate, see our utility rebate guide.

What ended, and when

Public Law 119-21, signed July 4, 2025 (the IRS calls it the "One, Big, Beautiful Bill"), moved up the end dates of two home energy credits:

Credit What it covered for heat pumps When it ended
25C, energy efficient home improvement credit Electric or natural gas heat pumps (including air-source and ductless) and heat pump water heaters Not allowed for property "placed in service after December 31, 2025." It was scheduled to run through 2032.
25D, residential clean energy credit Geothermal heat pumps (plus solar, batteries and similar) Not allowed for "expenditures made after December 31, 2025." It was scheduled to run through 2034.

Timing is set by the install, not the payment. The IRS's Form 5695 instructions say that for both credits "costs are treated as being paid when the original installation of the item is completed." Its FAQ gives the 25D example directly: if you paid in 2025 but installation was completed after December 31, 2025, you can't claim the credit. The IRS 25C page also says to claim the credit "for the tax year when the property is installed, not merely purchased."

Is anything coming back? A Senate bill, the Lowering Home Energy Costs Act (S.3722), was introduced January 29, 2026 and referred to the Finance Committee. As of Oct 31, 2026, Congress.gov lists it as "Introduced" only, so it isn't law.

Installed in 2025? What you can still claim

If your heat pump was installed by December 31, 2025, the credit is claimed on your 2025 return, on Form 5695.

25C (air-source, ductless and heat pump water heaters). From the IRS 25C page:

  • The credit is 30% of qualified costs, with a limit of "$2,000 per year for qualified heat pumps, water heaters, biomass stoves or biomass boilers." A separate $1,200 yearly limit covers other items, such as central AC, furnaces and insulation, for up to $3,200 a year.
  • The heat pump had to meet the Consortium for Energy Efficiency's highest efficiency tier (not counting any advanced tier). "Costs may include labor for installation."
  • For property placed in service in 2025, the IRS says no credit is allowed unless the item came from a qualified manufacturer and you report its Qualified Manufacturer Identification Number (QMID) on your return. Our suggestion: ask your installer or the manufacturer for it.
  • It applies to an existing home, in most cases your main home. It doesn't apply to a new home, or to a property you own but don't live in, such as a rental.
  • Subtract utility rebates. The IRS says "Public utility subsidies for buying or installing clean energy property are subtracted from qualified expenses." So a PECO or PPL rebate lowers the cost you claim.
  • The credit is nonrefundable, and "You can't apply any excess credit to future tax years."

25D (geothermal). The IRS 25D page says the credit was 30% of costs, with no annual dollar limit for geothermal heat pumps, which had to meet ENERGY STAR requirements. Unlike 25C, unused 25D credit can be carried forward. The 2025 Form 5695 instructions say you can "carry the unused portion of the residential clean energy credit to 2026."

Already filed your 2025 return without it? The IRS says that to claim a refund, you generally "must file an amended return within 3 years after the date you filed your original return or 2 years after the date you paid the tax, whichever is later."

What about a December 31, 2025 install? The IRS 25C page says the credit is allowed for property placed in service "before December 31, 2025," but the law and the IRS's own FAQ say the cutoff is property placed in service "after December 31, 2025." Our reading: the law controls, so an install completed on December 31, 2025 isn't excluded. Confirm with a tax professional if that's your situation.

What replaced the credit for 2026 installs

No new federal tax credit has replaced 25C or 25D. Here's what is available in our area, as of Oct 31, 2026.

Utility rebates (open now)

Utility Air-source heat pump Ductless mini-split Deadline or how to claim
PECO (electric) $200 or $300, by efficiency tier $150 or $300 Application received "within 90 days of purchase/install"
PPL Electric $225 or $325 ($350 or $475 for income-qualified households) See our rebate guide "within 180 days of installation"
Atlantic City Electric (South Jersey) $500 or $750 (split system) $750 "Your HVAC contractor will submit your rebate online"

Atlantic City Electric also lists up to $2,000 for a qualifying cold-climate heat pump (a limited-time offer running April 1, 2026 through June 30, 2027) and, for geothermal, half of the project cost, up to $10,000, when it replaces an air-source heat pump or electric furnace. Its page says the geothermal rebate "applies only to customers replacing an electric heating system." Rules, efficiency tiers and other utilities, including PSE&G and gas utilities, are in our utility rebate guide. For loans and 0% financing, see the financing section of our HVAC replacement guide.

Pennsylvania: Penn Energy Savers (not open)

Pennsylvania's federally funded home energy rebates, HOMES and HEEHR, will run through Penn Energy Savers. PA DEP says "As of September 2026, DEP is awaiting final DOE approval to launch the Home Energy Rebate programs." It also says the U.S. Department of Energy released new program guidance on June 1, 2026, and that the state's Energy Programs Office is working to understand those changes and "make the necessary changes to program design." The Penn Energy Savers site says "Coming Soon- Spring 2027."

  • Who it's for: households at or below 150% of area median income, or receiving government assistance such as HEAP or SNAP, according to its FAQ. The site says rebates can cover up to 100% of project costs, up to a maximum, for low-income households (below 80% of area median income) and 50% for moderate-income households (81%–150%). Per-item maximums aren't published.
  • Don't install first. Its FAQ says the program "cannot fund work that has already been completed or equipment that has been purchased prior to application approval."

New Jersey: IRA home energy rebates (not open)

New Jersey's Clean Energy Program says its IRA home energy rebate programs "are currently in development and are not yet open for applications." It adds that residents "should not assume that projects already underway or already completed will qualify for IRA rebates."

State tax credits

Our finding: we found no Pennsylvania or New Jersey state income tax credit for home heat pumps.

Watch for outdated claims

Some official pages haven't caught up. As of Oct 31, 2026:

  • ENERGY STAR's air-source heat pump page still says the tax credit "is effective for products purchased and installed between January 1, 2023, and December 31, 2032." Its own federal tax credits page says the credits run "Through December 31, 2025."
  • The IRS 25D page still says you can claim the credit "until the credit begins to phase out in 2033," on the same page that says it "is not available for any property placed in service after December 31, 2025."
  • PA DEP's Inflation Reduction Act page still says "Tax credits for lowering energy costs for households are available now."

If a contractor's quote subtracts a federal tax credit from a 2026 install, ask them to remove it. Our heat pump guide lists more cost guides with outdated credit claims.

Roofs are a separate case: the IRS says metal and asphalt roofs with cooling coatings or granules no longer qualified for 25C from 2023 on. See our roof replacement guide.

FAQ

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

No. The 25C credit isn't allowed for property placed in service after December 31, 2025, and the 25D credit (geothermal) isn't allowed for expenditures made after that date.

I paid for my heat pump in 2025 but it was installed in January 2026. Do I qualify?

No. The IRS treats costs as paid when installation is completed, so a January 2026 install doesn't qualify for 25C or 25D.

My heat pump was installed in 2025. Can I still claim the credit?

Yes, on your 2025 return using Form 5695, if the heat pump met the efficiency and QMID requirements. If you've already filed, the IRS generally allows an amended return within 3 years after you filed or 2 years after you paid the tax, whichever is later.

Do utility rebates reduce my 2025 tax credit?

Yes. The IRS says public utility subsidies are subtracted from your qualified costs before you figure the credit.

When will Pennsylvania's heat pump rebates open?

Penn Energy Savers says "Coming Soon- Spring 2027." Don't buy or install equipment before you're approved if you're hoping to use it.

Thinking about a project?

If you'd like a quote from a local heating and cooling contractor, you can use our quote form. We may be paid by contractors when we refer a job to them. That doesn't change the rules in this guide, which come from the sources listed below. Learn how we make money.

Sources

All checked Oct 31, 2026.