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Heat Pump Tax Credit in 2026: What Ended, What You Can Still Claim
The federal 25C heat pump tax credit ended for 2026 installs. Here's how to still claim it for a 2025 install on Form 5695, what changed under the OBBBA, and the state and utility rebates that remain.
If you’re searching “tax credit for a heat pump,” the answer in 2026 depends entirely on one date: when your heat pump was (or will be) placed in service.
Here is the short version. The federal 25C heat pump credit was ended early by the One Big Beautiful Bill Act (OBBBA), signed July 2025. It now applies only to property placed in service on or before December 31, 2025. If your heat pump went in during 2025, you can still claim it on the return you file in 2026. If you’re installing in 2026, the federal 25C credit is gone, but state and utility programs may still help.
Federal heat pump credit: where it stands
2025 installs: still claimable. A qualifying heat pump placed in service on or before Dec 31, 2025 earns the 25C credit (30% of eligible cost, up to $2,000) on the federal return you file in 2026, on IRS Form 5695, Part II.
2026 installs: no federal 25C credit. The OBBBA accelerated the credit’s termination; it does not cover property placed in service in 2026 or later. Look to state and utility rebates instead.
This is a homeowner-first overview, not tax advice. If your situation is complex (rentals, business use, a multi-year project), talk to a tax professional. Want a place to track quotes, model numbers, and documentation tasks while you sort this out? Start with My Plan.
30%
Credit rate
of eligible cost — 25C, 2025 installs only
$2,000
Heat pump cap (per year)
inside the $3,200 annual 25C umbrella
Dec 31, 2025
Federal cutoff
placed-in-service deadline under OBBBA
On this page
- What changed, in one table
- (a) Filing for a 2025 install (returns filed in 2026)
- How you claim it: Form 5695, Part II
- Recordkeeping for a 2025 claim
- (b) Planning a 2026 installation
- (c) State & utility rebates (still alive in 2026)
- A fast checklist before you commit (either year)
- Common mistakes (still worth avoiding)
- Next steps
What changed, in one table
The Inflation Reduction Act had extended 25C all the way to the end of 2032. The OBBBA repealed that extension and moved the finish line to the end of 2025. The mechanics of the credit didn’t change for 2025 — only the expiration date did.
| 2025 installs | 2026 installs | |
|---|---|---|
| Federal 25C heat pump credit | Yes — 30% of eligible cost | No — terminated by OBBBA |
| Annual heat pump cap | $2,000 | n/a |
| Annual 25C umbrella | $3,200 | n/a |
| Where you claim it | Form 5695 (2025 return, filed 2026) | n/a |
| Refundable? | No (nonrefundable) | n/a |
| State / utility rebates | Often available | Often still available |
The IRS page for the credit (last reviewed in spring 2026) now states plainly that the credit is allowed for property placed in service “on or after Jan. 1, 2023, and before December 31, 2025,” and that you can claim it “for improvements made through December 31, 2025.” There is no 2026 column.
(a) Filing for a 2025 install (returns filed in 2026)
If your heat pump was installed and running on or before December 31, 2025, you’re in the good column. You claim the credit on the 2025 tax return you file in 2026.
What you get: 30% of eligible cost, capped at $2,000 for the heat pump. Eligible cost can include the equipment and installation labor. For heat pumps specifically, labor counts (that’s not true of, say, insulation, where labor is excluded). Permit fees tied to the install are reasonable to include in your project record; ask your preparer if a specific line item belongs.
The cap math people get wrong. The $2,000 heat pump limit isn’t standalone; it lives inside a $3,200 total annual 25C cap. That $3,200 splits into two buckets:
- $2,000/yr for heat pumps, heat pump water heaters, biomass stoves and biomass boilers.
- $1,200/yr for the rest: insulation and air sealing, exterior doors ($250/door, $500 total), windows and skylights ($600), central AC, furnaces and boilers, a home energy audit ($150), and certain electrical work to support the equipment.
So a household that did a heat pump and insulation and a panel upgrade in 2025 could, in principle, stack toward the full $3,200: $2,000 from the heat pump bucket plus up to $1,200 from the other bucket. (If your panel work was part of that project, the electric panel upgrade tax credit post walks through how panel costs fit the $1,200 side.)
A worked example, because the cap surprises people. Say a 2025 ducted heat pump install came to $14,000 of eligible cost. Thirty percent of that is $4,200, but the heat pump cap stops you at $2,000. You don’t get $4,200. The percentage is real; the dollar ceiling is the binding constraint on almost every full-system job.
2025 heat pump: 30% math vs. the $2,000 cap
What the rate alone would give
Heat pump cap is the binding limit
How you claim it: Form 5695, Part II
File IRS Form 5695, Residential Energy Credits, Part II, with your return. One rule trips people up: you claim the credit for the tax year the property is placed in service (installed and operational), not the year you ordered or paid a deposit. A heat pump you paid for in December 2025 but that wasn’t energized until January 2026 is a 2026 placed-in-service date, and that misses the federal cutoff entirely. If your install straddled year-end, pin down the commissioning date with your contractor before you file.
The 2025 QMID / PIN requirement is real
Starting with 2025 installs, the IRS requires that the equipment be made by a qualified manufacturer and that you report the Qualified Manufacturer Identification Number (QMID/PIN) for the item on your return. No valid identifier, no credit, even if the unit is genuinely efficient. Ask your installer or the manufacturer for it in writing, and keep it with your records. We’ve seen homeowners assume the model sticker was enough; it isn’t.
Recordkeeping for a 2025 claim
Keep these together. If you switch contractors, move, or change email accounts, the paper trail is what survives.
- Itemized invoice with your name and address, amounts, and dates paid.
- Proof of payment (card receipt, cancelled check, or financing statement).
- Exact model numbers for both outdoor and indoor units.
- Placed-in-service date: the date the system was operational.
- QMID / PIN for the equipment.
- Manufacturer’s certification statement: keep it; don’t attach it unless asked.
One quiet gotcha on cost: if a manufacturer, distributor, seller, or installer rebate reduced your price, the IRS treats that as a purchase-price adjustment, so you subtract it before computing the credit. The same goes for public utility subsidies for the equipment. State energy-efficiency incentives are usually treated differently (they may not reduce your cost, but could be taxable income). When rebates and the credit collide, that’s the moment to ask a preparer.
(b) Planning a 2026 installation
Here’s the part the older versions of this article got wrong, and that a lot of contractor pages still haven’t updated: there is no federal 25C credit for a heat pump placed in service in 2026. The OBBBA didn’t phase it down gradually — it cut it off at the end of 2025.
What that means in practice:
- A 30% / up-to-$2,000 federal credit is not part of your 2026 budget. If a salesperson quotes you a price “after the federal tax credit,” that math is stale. Ask them to show the price without it.
- A heat pump can still be the right call on operating cost alone, especially if you’re replacing electric resistance heat, oil, or propane, or pairing it with cooling you were going to buy anyway. Run your own numbers rather than trusting a generic payback claim. Our Heat Pump vs Furnace Calculator lets you plug in your fuel prices and climate.
- Install cost is the bigger lever now that the federal credit is gone. The heat pump installation cost breakdown covers what drives a quote (ducted vs ductless, electrical work, cold-climate models) so you can compare bids on equal footing.
What about the solar / Residential Clean Energy credit?
The OBBBA also moved up the deadline for the separate 25D Residential Clean Energy Credit (rooftop solar, geothermal heat pumps, battery storage). Air-source heat pumps were never part of 25D; they’re 25C. If you’re weighing solar, the timeline is its own story; see our solar tax credit in 2026 write-up.
(c) State & utility rebates (still alive in 2026)
Losing the federal credit doesn’t mean losing every incentive. Two channels are separate from 25C and are still operating in much of the country.
IRA Home Energy Rebates. The Inflation Reduction Act funded two rebate programs, commonly called HEEHRA (the Home Electrification and Appliance Rebates, point-of-sale rebates for heat pumps and other electric equipment, with amounts tied to household income) and HOMES (rebates tied to modeled or measured whole-home energy savings). These are administered by your state energy office, not the IRS, and they roll out on each state’s own schedule. Some states have programs live; others are still standing them up or have paused intake. Because the money flows through states, a rebate that exists in one state may not exist next door.
Utility rebates. Many electric utilities offer their own heat pump rebates, often a few hundred to a couple thousand dollars per qualifying system, sometimes more for cold-climate or whole-home conversions. Utilities also frequently offer time-of-use rate plans that can noticeably change what a heat pump costs to run. Shifting heavy heating or cooling away from peak pricing windows is worth modeling before you commit.
How to actually find what you qualify for
Two searches do most of the work: your state energy office website (search your state name plus “home energy rebates”), and your electric utility’s rebate or efficiency page. Confirm three things before you count on a number: that the program is currently accepting applications, that your exact equipment qualifies, and whether the rebate is point-of-sale (cuts your price up front) or reimbursement (you pay, then claim).
We’re deliberately not quoting specific dollar amounts here, because they vary by state, utility, income, and equipment, and they change. Promising a number we can’t stand behind would be worse than useless.
A fast checklist before you commit (either year)
- Confirm the exact outdoor and indoor model numbers, and whether they meet the efficiency tier for the year of install.
- For a 2025 install: confirm the placed-in-service date and get the QMID/PIN in writing.
- For a 2026 install: build your budget without a federal credit; price-check against state and utility rebates separately.
- Keep an itemized invoice with a clean equipment-vs-labor breakdown.
- Track everything in one place so nothing gets lost between quote, install, and tax time: My Plan.
Common mistakes (still worth avoiding)
Confusing “ordered” with “placed in service.” The federal cutoff is about when the system was operational, not when you signed the contract. This is the single most expensive misunderstanding right now.
Trusting a quote that still bakes in the federal credit for a 2026 job. That credit is gone for 2026 installs. Ask for the price without it.
Claiming a product category instead of the exact model. “A heat pump” isn’t enough for a 2025 claim: you need the specific models and the manufacturer’s identifier.
Forgetting the credit is nonrefundable. If you owe little federal tax, a 25C credit on a 2025 install may not deliver its full face value, and there’s no carryforward. Worth checking your likely liability before you assume the full $2,000.
Double-counting incentives. A dealer or utility rebate can reduce the cost base the federal credit is figured on. Track each incentive so you don’t overstate eligible cost.
Next steps
- Comparing operating costs (the bigger lever now): Heat Pump vs Furnace Calculator
- What drives an install quote: Heat pump installation cost
- Panel work as part of the project: Electric panel upgrade tax credit
- If electrifying might force a service upgrade: 100 amp to 200 amp upgrade cost
- Keep scope, model numbers, and documentation in one place: My Plan
- When in doubt, verify the current rules on the IRS website or with a qualified tax professional.
Sources & further reading
- Energy Efficient Home Improvement Credit (25C) — IRS
- About Form 5695, Residential Energy Credits — IRS
- Air Source Heat Pumps Tax Credit — ENERGY STAR
- Home Energy Rebates & Home Upgrades — U.S. Department of Energy
Frequently asked questions
Is there a federal heat pump tax credit in 2026?+
No federal 25C credit applies to a heat pump placed in service in 2026 or later. The One Big Beautiful Bill Act, signed July 2025, ended the 25C Energy Efficient Home Improvement Credit early, limiting it to property placed in service on or before December 31, 2025 instead of the 2032 date the Inflation Reduction Act had set. State energy office rebates (IRA Home Energy Rebates) and utility heat pump rebates remain available in many areas for 2026 installs.
Can I still claim a heat pump credit for a 2025 install?+
Yes. A heat pump placed in service (installed and operational) on or before December 31, 2025 earns 30% of eligible cost up to $2,000, claimed on Form 5695, Part II, with the tax year 2025 return you file in 2026. The placed-in-service date is what counts, not the order or deposit date, so a unit energized in January 2026 misses the cutoff. You must also report the equipment's Qualified Manufacturer Identification Number (QMID/PIN), which is required for 2025 installs.
How much is the federal heat pump tax credit worth?+
30% of eligible cost, capped at $2,000 per year for a heat pump placed in service in 2025. Eligible cost includes both equipment and installation labor, unlike insulation where labor is excluded. On a $14,000 ducted install, 30% would be $4,200, but the $2,000 cap is the binding limit, so the cap (not the rate) governs almost every full-system job. That $2,000 sits inside a $3,200 total annual 25C ceiling.
What is the 25C annual cap, and which form do I use?+
The total annual 25C cap is $3,200, split into two buckets. Heat pumps, heat pump water heaters, biomass stoves and biomass boilers share a $2,000 yearly limit; insulation, windows ($600), exterior doors ($250 each, $500 total), a home energy audit ($150) and certain electrical work share a separate $1,200 limit. A 2025 project combining a heat pump with insulation and a panel upgrade can stack toward the full $3,200. Claim it on IRS Form 5695, Part II, for the year the property was placed in service.
Do state and utility rebates still exist in 2026?+
Yes in much of the country, and they are separate from the now-expired federal 25C credit. Two channels run independently: IRA Home Energy Rebates (HEEHRA, income-tied point-of-sale rebates, and HOMES, tied to whole-home energy savings) administered by your state energy office, and utility heat pump rebates that typically run a few hundred to a couple thousand dollars per system. Because HEEHRA and HOMES roll out state by state, a rebate available in one state may not exist next door, so confirm your state office and utility are currently accepting applications.
What records do I need to claim the credit for a 2025 install?+
Six items: an itemized invoice with your name and address, proof of payment (card receipt, cancelled check or financing statement), the exact outdoor and indoor model numbers, the placed-in-service date, the equipment's Qualified Manufacturer Identification Number (QMID/PIN), and the manufacturer's certification statement (keep it, do not attach it unless asked). One cost adjustment: a manufacturer, distributor, seller, installer or public utility rebate that lowered your price must be subtracted before you compute the 30% credit.
How do I know if my exact heat pump model qualifies?+
The specific outdoor and indoor model pairing must meet the Consortium for Energy Efficiency (CEE) highest efficiency tier (excluding any advanced tier) in effect at the start of the install year, and the manufacturer must supply a QMID/PIN for it. Marketing labels like high efficiency carry no weight, and the model sticker alone is not proof. For a 2025 claim, get the installer to confirm both model numbers qualify and that the QMID/PIN is available in writing before you file, since no valid identifier means no credit.
Is the 25C credit refundable?+
No, 25C is nonrefundable: it reduces your federal income tax only down to zero, never below. There is no carryforward, so any portion exceeding your tax liability is lost rather than rolled to a later year. If you owe little federal tax, a 2025 heat pump credit may deliver less than the full $2,000, so check your likely liability first.
I missed installing in 2025. What are my options for 2026?+
Budget without the federal 25C credit, since the 30% / up-to-$2,000 credit no longer applies to 2026 installs, and reject any quote priced after the federal credit. Two incentives remain: IRA Home Energy Rebates through your state energy office and utility heat pump rebates, often paired with time-of-use rate plans that change running costs. A heat pump can still pay back on operating cost alone when it replaces electric resistance, oil or propane heat, so run your own fuel-price numbers before committing.
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The federal 25C heat pump water heater tax credit ended for 2026 installs. Here's how to still claim it for a 2025 install on Form 5695, what changed under the OBBBA, the ENERGY STAR and CEE-tier rules, and the rebates that remain.