The incentive landscape for heat pumps has never been better. The Inflation Reduction Act of 2022 (IRA) created a new generation of federal tax credits and rebate programs that run through at least 2032. Combined with state programs and utility rebates, eligible homeowners can reduce heat pump costs by $2,000 to $10,000 or more.
This guide explains how each type of incentive works, how to stack them, and where to find the most current information for your state.
Find out how much you could save with a heat pump in your state — including your estimated incentives.
Use our free Heat Pump Savings Calculator →Federal Incentive #1: The 25C Energy Efficient Home Improvement Credit
25C Heat Pump Tax Credit
The most widely available federal incentive. This is a tax credit — it directly reduces your federal income tax liability dollar-for-dollar. You cannot receive more than you owe in federal taxes in a given year.
- Credit amount: 30% of the cost of qualifying heat pump equipment and installation
- Annual cap: $2,000 for heat pumps (separate $600 cap for heat pump water heaters)
- Eligible equipment: ENERGY STAR certified air-source heat pumps meeting SEER2 and HSPF2 minimum thresholds
- Applies to: Primary residence only (not vacation homes or rental properties)
- How to claim: File IRS Form 5695 with your federal tax return
- Valid through: 2032 (with annual reset — you can claim $2,000 per year)
Important: The 25C credit has an annual cap of $2,000 per taxpayer. However, the credit resets each year, meaning you can claim up to $2,000 in 2026, another $2,000 in 2027 for additional qualifying improvements, and so on through 2032. This "annual reset" feature allows you to strategically spread major home improvements across multiple tax years to maximize total credits claimed.
Federal Incentive #2: The 25D Geothermal Credit
25D Geothermal Tax Credit
If you're installing a ground-source (geothermal) heat pump, the 25D credit is substantially more valuable than the 25C:
- Credit amount: 30% of total installed cost (equipment + labor + loop field)
- No annual dollar cap — applies to total system cost
- Phase-down schedule: 30% through 2032, 26% in 2033, 22% in 2034
- Eligible equipment: Qualified geothermal heat pump property
- Applies to: Primary and secondary residences
- How to claim: IRS Form 5695
On a $25,000 geothermal installation, the 25D credit is worth $7,500 — far exceeding the 25C's $2,000 cap for the same system.
Federal Incentive #3: HEEHRA Rebates (Income-Qualified)
High-Efficiency Electric Home Rebate Act (HEEHRA)
The IRA also created the HEEHRA program, which provides point-of-sale rebates (not tax credits) for income-qualified households. These are administered by states and are being rolled out on a state-by-state basis.
- Heat pump rebate: Up to $8,000 for households below 150% of Area Median Income (AMI)
- Income tiers:
- Below 80% AMI: 100% of heat pump cost covered (up to $8,000)
- 80%–150% AMI: 50% of heat pump cost covered (up to $4,000)
- Above 150% AMI: Not eligible for HEEHRA
- Additional rebates: HEEHRA also covers electric panel upgrades ($4,000), insulation ($1,600), and other electrification upgrades
- Stackable: HEEHRA rebates can generally be stacked with the 25C tax credit
HEEHRA availability varies by state — contact your state energy office or check their website to confirm your state's program status.
State-Level Programs (Selected States)
In addition to federal incentives, many states offer their own heat pump rebate programs. The following represents a snapshot of notable state programs as of early 2026. Always verify current program status with your state energy office or utility, as programs open, close, and change frequently.
| State | Program | Heat Pump Incentive | Where to Apply |
|---|---|---|---|
| Massachusetts | Mass Save | Up to $10,000 rebate | masssave.com |
| New York | NY Clean Heat | Up to $7,500 rebate (income tiers) | nyserda.ny.gov |
| California | TECH Clean California | $1,500–$3,000 through PG&E, SCE, SoCalGas utilities | techclean.org |
| Maine | Efficiency Maine | $200–$2,000 rebate | efficiencymaine.com |
| Oregon | Oregon Energy Trust | $500–$3,000 depending on income | energytrust.org |
| Colorado | Xcel Energy Rebates | $500–$2,500 (utility-specific) | xcelenergy.com |
| Minnesota | CenterPoint Energy/Xcel | $500–$3,000 through utilities | Check your utility |
| Vermont | Efficiency Vermont | $1,200–$2,500 | efficiencyvermont.com |
| Michigan | Consumers Energy/DTE | $300–$2,500 (utility-specific) | Check your utility |
| Washington | Puget Sound Energy | Up to $3,000 | pse.com |
| Maryland | EmPOWER Maryland | $500–$1,500 + income qualified programs | empower.md.gov |
| Connecticut | Energize CT | Up to $4,000 | energizect.com |
Utility Rebates
Beyond federal and state programs, many electric utilities offer their own heat pump rebates, which can be stacked with federal and state incentives. Utility rebate amounts vary widely — from $200 to $2,500 — and programs open and close frequently based on funding availability.
To find utility rebates in your area:
- Visit your electric utility's website and search for "heat pump rebate" or "HVAC rebate."
- Search the ENERGY STAR Rebate Finder at energystar.gov/rebate-finder.
- Check the DSIRE database at dsireusa.org and filter by your state.
- Ask your HVAC contractor — reputable contractors are aware of local utility programs.
How to Stack Multiple Incentives
The most powerful strategy is stacking multiple incentives. Here's an example scenario for a household below 80% AMI installing a $12,000 central heat pump in a state with a $2,000 utility rebate:
| Incentive | Amount |
|---|---|
| Gross system cost | $12,000 |
| HEEHRA rebate (100% up to $8,000) | –$8,000 |
| State utility rebate | –$2,000 |
| 25C federal tax credit (30% of remaining $2,000) | –$600 |
| Net out-of-pocket cost | $1,400 |
Even at higher income levels above HEEHRA eligibility, the 25C credit plus state and utility rebates can often bring a $10,000 system down to $6,000–$7,000 net cost.
Tips for Maximizing Your Incentives
- Apply before buying: Some programs require pre-approval or have limited funding that can run out mid-year. Apply to state and utility programs before you schedule installation.
- Get ENERGY STAR certified equipment: The 25C credit requires ENERGY STAR certification. Your contractor should confirm this before you purchase.
- Save all documentation: Keep your contractor invoice, equipment model numbers, ENERGY STAR certification, and any rebate confirmation letters. You'll need these for IRS Form 5695 and any rebate audits.
- Consult a tax professional: Tax credit eligibility depends on your specific tax situation. Consult a CPA or tax professional to optimize when and how you claim credits.
- Check for annual reset: The 25C credit resets annually. If you're doing multiple upgrades (heat pump + water heater + insulation), spreading them across tax years may maximize total credits.
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