Heat Pump Tax Credits and Rebates

Federal, state, and utility programs can reduce the net cost of a heat pump installation, but the rules, amounts, and eligibility requirements vary by program and change over time. This page summarizes the main federal incentives available for heat pumps, how they work, and general steps for claiming them — always confirm current details with the IRS, your state energy office, or a tax professional before you file.

Federal Tax Credit: Energy Efficient Home Improvement Credit (25C)

The Energy Efficient Home Improvement Credit, sometimes referred to by its tax code section, 25C, allows homeowners to claim 30% of the cost of a qualifying heat pump, up to a maximum credit of $2,000 per year. This is a nonrefundable federal income tax credit, meaning it reduces the tax you owe rather than providing a direct payment, and it applies to your primary or secondary residence. Unlike some older programs, this credit can generally be claimed every year you make an eligible purchase, rather than being limited to a single lifetime amount, though annual caps still apply.

IRA Rebates: High-Efficiency Electric Home Rebate Program (HEEHRA)

The Inflation Reduction Act created the High-Efficiency Electric Home Rebate Program, often called HEEHRA, which can provide a rebate of up to $8,000 toward the cost of a qualifying heat pump installation. This program is administered by individual states and is generally aimed at low- and moderate-income households, with the rebate amount based on household income relative to the area median income. Because states roll out HEEHRA on their own timelines, availability and exact rebate amounts differ depending on where you live.

Comparing the Main Federal Programs

Program	Type	Maximum Amount	Basis
25C Energy Efficient Home Improvement Credit	Tax credit	Up to $2,000 per year	30% of project cost, most households
HEEHRA (IRA rebate)	Point-of-sale or reimbursed rebate	Up to $8,000	Based on household income, state-administered

State and Utility Rebates

Many state energy offices and local utility companies offer their own rebates for heat pump installations, sometimes stacked on top of the federal programs above. These programs commonly require the installed equipment to meet a minimum efficiency rating, such as ENERGY STAR certification, and may require using a contractor enrolled in the utility’s program. Because these offers change frequently, check directly with your state energy office or your electric or gas utility for current program details before you sign a contract.

Eligibility Requirements

• Equipment generally must meet minimum efficiency requirements set by the program, such as ENERGY STAR or Consortium for Energy Efficiency (CEE) tiers.
• The 25C tax credit applies to your primary or secondary residence, but not to a property used solely as a rental.
• HEEHRA rebate amounts depend on household income relative to the area median income, and some households may be eligible for the full amount while others receive a partial rebate or none.
• Save your equipment specification sheets, invoices, and a Manufacturer’s Certification Statement, since these are typically needed to claim the tax credit.

Why Program Details Change

Federal tax credit amounts, state rebate funding, and utility program budgets are all subject to change from year to year, and some state rebate programs have limited funding that can run out before the program year ends. A model or efficiency tier that was eligible last year may not automatically be eligible this year, and rebate amounts for HEEHRA in particular depend on both your household income and how much funding your state has allocated. Because of this, it’s worth confirming current program status and equipment eligibility close to the time you plan to install, rather than relying on figures from a prior year.

How to Claim These Incentives

1. Confirm the specific equipment model meets the efficiency requirements for the credit or rebate you’re targeting.
2. Keep the invoice, model and serial numbers, and any manufacturer certification documents from the installation.
3. Claim the 25C credit using IRS Form 5695 when you file your federal tax return for the year the equipment was installed.
4. Apply for HEEHRA or state and utility rebates through the administering state agency or utility program, since the application process is separate from the federal tax credit.
5. Ask your contractor for documentation up front — many are familiar with the paperwork these programs require.

Getting Quotes That Account for Incentives

Because eligibility and rebate amounts vary by household and location, it helps to discuss available incentives directly with the contractors you’re considering, since many are familiar with current state and utility programs in their service area. Through HomeMatchr, you can request up to 5 no-obligation quotes from independent contractors and ask each one what federal, state, or utility incentives may apply to your project. HomeMatchr is an advertising-supported service and may receive a referral fee when you connect with a provider.