The short version: Federal IRA 25C tax credit expired December 31, 2025. State HEEHRA programs and utility rebates are still active, especially strong in MA, CA, NY, IL, MN. The math for installing in 2026 is still favorable in most states despite the federal change.
What 25C was
Internal Revenue Code Section 25C, the Energy Efficient Home Improvement Credit, was a federal income tax credit for qualified energy efficiency improvements, including air-source heat pumps and biomass stoves.1
For 2023-2025, the residential heat pump credit was up to 30 percent of the install cost capped at $2,000 per year. Installations completed and placed in service by December 31, 2025 qualified.
What expired and what didn’t
Under the Inflation Reduction Act timeline, several provisions had different expiration dates. Specifically for residential heat pumps:
Expired Dec 31, 2025: 25C credit for air-source heat pumps placed in service in 2026 or later.
Still active: HEEHRA / HEAR programs (state-administered, federally funded), individual state and utility rebates, geothermal heat pump credit (different code section, longer timeline).
The rest of the IRA’s residential energy provisions are on different schedules. Residential clean energy credits (solar, wind, geothermal, fuel cells) under Section 25D continue through 2034 with phase-down beginning 2033.
What replaced 25C
Nothing federal at the same scale. The post-25C federal landscape for residential heat pumps:
- HEEHRA pass-through through state energy offices: up to $8,000 for income-eligible households (≤80% AMI), $4,000 for 80-150% AMI.
- State-specific tax credits and rebates: vary widely. Strong in MA, NY, CA, ME. Modest in TX, FL, AZ. Weak in much of the South.
- Utility rebates: most major utilities offer $300-$3,000 per heat pump. Eversource, PG&E, ComEd, Xcel, Mass Save, NYSEG, and others have substantial programs.
For state specifics, see the 2026 heat pump rebate guide and your state’s individual page from the heat pump rebates hub.
Math for installing in 2026 vs 2025
Hypothetical: $15,000 install, household at 100% AMI, in Massachusetts.
| Year | Federal 25C | State + utility | Total saved |
|---|---|---|---|
| 2025 | $2,000 | ~$8,000 | ~$10,000 |
| 2026 | $0 | ~$10,000-$14,000 | ~$10,000-$14,000 |
In strong-program states like Massachusetts, the loss of 25C is largely offset by state programs. In weak-program states like Texas, the loss is more meaningful.
What to do if you installed in 2025
If you installed an eligible heat pump in 2025 but didn’t claim the credit on your 2025 tax return:
- File Form 1040X (amended return) for tax year 2025.
- Attach Form 5695 (Residential Energy Credits).
- Documentation: AHRI certification, ENERGY STAR certificate, dated invoice, manufacturer model and serial.
- Window: amended returns must be filed within 3 years of the original return’s due date.
If you started a 2025 install that wasn’t completed and placed in service by Dec 31, 2025: the credit doesn’t apply. Service date matters more than purchase date.
What to do for a 2026 install
Two things change vs 2025:
- Skip Form 5695. No federal credit to claim.
- Apply for HEEHRA before install starts (in most states). Pre-approval is part of the program; post-install applications often don’t qualify.
Otherwise the install process is the same as 2025, get three quotes, confirm AHRI / ENERGY STAR eligibility, confirm contractor is on state’s approved list.
What might come back
A few scenarios that could restore federal incentives:
- New tax legislation: politically difficult but not impossible.
- State pass-through expansion: some states could add their own state-level tax credits to compensate.
- Utility-led programs: some utilities are expanding rebates as state HEEHRA funds run out.
None of these are scheduled. Plan as if 25C is gone for the foreseeable future.
What about geothermal
The Section 25D Residential Clean Energy Credit covers geothermal heat pumps and is still active through 2034 with phase-down beginning 2033.1
Geothermal heat pumps qualify for up to 30 percent credit on installation costs, no annual cap. For homes considering geothermal (typically more expensive but longer-lived than air-source), this remains a meaningful incentive.
For most homes, air-source is the more practical choice; geothermal makes sense for new construction or when the homeowner has site advantages (vertical drilling space, etc.).
What to do next
If you’re planning a 2026 install: read the 2026 heat pump rebate guide and your state-specific page.
If you installed in 2025 but didn’t claim: file an amended return with Form 5695.
If you’re comparing heat pumps to keeping a gas furnace: see heat pump vs gas furnace: 10-year cost for a senior homeowner.
- 25C expired Dec 31, 2025. No federal credit for 2026 air-source heat pump installs.
- HEEHRA, state programs, and utility rebates still active.
- In strong-program states the math is still favorable.
- Geothermal still qualifies for 25D credit through 2034.