Heat Pump Tax Credit: Eligibility, Amount, and How to Claim It

Last reviewed: 2026-05-18 (UTC)

If you are searching for the heat pump tax credit, the most important answer is still yes, but with a date you need to check closely.

A qualifying heat pump can still earn the federal Energy Efficient Home Improvement Credit under Section 25C, and the credit is generally 30% of eligible project cost up to $2,000 for the year. But under current IRS guidance, the credit only applies to qualifying property placed in service on or after Jan. 1, 2023 and before Dec. 31, 2025.

That means a project installed in 2025 can still be claimed when you file. A brand-new installation in 2026 should not be budgeted around this credit unless current federal guidance changes.

This page is informational, not tax advice. Use it to plan smarter questions, then confirm your exact filing treatment with the current IRS guidance and your tax preparer.

Quick answer

Question	Practical answer
Is there a federal heat pump tax credit?	Yes. Qualifying heat pumps can fall under the Section 25C Energy Efficient Home Improvement Credit.
How much is it worth?	Usually 30% of eligible cost, up to $2,000 for the year for qualifying heat pumps, heat pump water heaters, and biomass combined.
Does every heat pump qualify?	No. The model has to meet the current efficiency rules for the year it was installed.
Do labor costs count?	Usually yes for qualifying heat pumps under current IRS guidance.
Is there a federal income limit?	Not a simple AGI threshold for this credit. That confusion usually comes from rebate programs, not the federal heat pump tax credit.
Can I still claim it in 2026?	You may still claim a qualifying 2025 installation when you file, but a new 2026 installation should be checked against current law before you count on the credit.
How do I claim it?	Usually on IRS Form 5695 Part II for the tax year the property was placed in service.

Does the heat pump tax credit still apply in 2026?

This is the first question many homeowners actually need answered.

The current IRS Energy Efficient Home Improvement Credit page says you can claim the credit for qualifying property placed in service on or after Jan. 1, 2023 and before Dec. 31, 2025.

That creates two different situations:

Your heat pump was installed by Dec. 31, 2025. You may still be able to claim the credit when you file, as long as the system and documentation meet the rules.
You are planning a new heat pump installation in 2026. Do not assume the federal credit still applies just because older articles say it does. Check the current IRS page before you build that savings into your budget.

In other words, filing in 2026 is not the same thing as installing in 2026. The date that usually matters is when the property was placed in service, not when you first got the quote or ordered the equipment.

If you are trying to separate that federal question from rebate questions, Watt Wallet's Heat Pump Tax Credit Income Limit Explained is the best companion read.

How much is the heat pump tax credit?

Under current IRS and ENERGY STAR guidance, the heat pump tax credit is generally:

30% of eligible project cost
up to $2,000 per year for qualifying heat pumps, heat pump water heaters, and biomass systems combined

There is also a broader annual structure behind the scenes:

up to $2,000 for the heat pump / heat pump water heater / biomass bucket
up to $1,200 for certain other 25C categories
up to $3,200 total in one year across the eligible buckets

That does not mean every heat pump project gets a full $2,000. The cap matters only after you calculate 30% of eligible cost.

Simple example

If your qualifying heat pump project costs $12,000 installed and you receive a $1,000 utility rebate that has to be treated as a purchase-price reduction, your adjusted qualified cost may be $11,000.

30% of $11,000 = $3,300
but the annual heat pump bucket is capped at $2,000
so the credit would be $2,000, assuming the rest of the rules are met

If you are stacking multiple incentives, use Can You Stack Rebates and Tax Credits? before you rely on the first savings number a contractor gives you.

What heat pumps qualify?

A qualifying heat pump is not just "any high-efficiency system."

The IRS says qualifying heat pumps must meet or exceed the applicable top CEE efficiency tier for the year the property was installed. ENERGY STAR's current consumer-facing guide translates that into a practical homeowner rule for 2025: eligible air-source heat pumps need to be recognized as ENERGY STAR Most Efficient.

That is important for three reasons:

central ducted heat pumps can qualify
ductless mini-split heat pumps can qualify
a salesperson saying "this unit is high efficiency" is not the same thing as proving it meets the tax-credit rule

The safest homeowner workflow is:

shortlist the exact model you are considering
check the current ENERGY STAR eligible-model list
ask your contractor to confirm in writing that the installed model matches the qualifying listing for the install year
save the model and manufacturer documentation with your invoice

For 2025 installs, ENERGY STAR notes two eligibility pathways: a cold-climate path and a cooling-dominated or dual-fuel path. That matters because some pages online still talk about the credit as if one generic efficiency label is enough.

Who can claim the heat pump tax credit?

The IRS frames the credit around improvements to an existing U.S. home, not new construction.

For most homeowners, the safest default is:

the home is in the United States
the property is an existing home you improve
you use the home as a residence
you paid for the qualifying improvement
you have enough tax liability to use a nonrefundable credit

The part that confuses people is residence type.

The general IRS 25C page tells homeowners to think in terms of a main home. ENERGY STAR's more category-specific guidance says electric or natural gas heat pumps fall in the group that can include some second-home and renter-paid improvements when the home is used as a residence.

So if your case is anything other than a standard owner-occupied primary residence, do not guess. Verify the current official guidance before you count on the credit.

Two useful guardrails:

Landlords generally cannot claim this credit for homes they rent out but do not use as a residence themselves.
Renters who pay for eligible improvements may qualify in some circumstances, but should verify the current rules carefully.

What costs count toward the credit?

For qualifying heat pumps, the current IRS page says costs may include labor for installation. That matters because many homeowners underestimate the tax-credit basis by looking only at equipment price.

Qualified costs can include the installed heat pump project cost when the system and install meet the rules. The safer approach is to get an itemized invoice that separates:

equipment
installation labor
electrical work
permits or related project costs
nonqualifying add-ons

That helps with two common problems:

proving what part of the project is actually tied to the qualifying heat pump
separating the heat pump credit from other items with their own rules, such as the electric panel upgrade tax credit

Do not assume every related project cost automatically rides along with the heat pump credit. If the invoice is vague, ask for a cleaner breakdown before install.

How rebates and other incentives affect the tax credit math

This is where homeowners often lose clarity.

The IRS says public utility subsidies for buying or installing clean energy property are subtracted from qualified expenses. Manufacturer, distributor, seller, or installer rebates tied to the purchase price may also reduce the amount you can claim.

But the IRS also says state energy efficiency incentives are generally not subtracted from qualified costs unless they function as a true rebate or purchase-price adjustment under federal tax law.

That means "I got a rebate" is not specific enough to know the tax treatment.

Use this rule of thumb:

utility subsidy tied to the install -> usually reduces your qualified cost
state incentive -> may or may not reduce qualified cost depending on how it is structured
contractor discount or manufacturer rebate -> often reduces purchase price
federal tax credit -> claimed separately at filing time, not as an upfront discount

If you are sorting out the local side of that math, use Heat Pump Rebates by State, Heat Pump Water Heater Rebate Guide for water-heater projects, and How to Compare Rebates, Tax Credits, and Installer Quotes before you approve the project budget.

How to claim the heat pump tax credit

The current IRS guidance says to file Form 5695, Part II with your tax return for the year the property was installed.

A clean claiming workflow looks like this:

Confirm the heat pump model qualifies for the installation year.
Confirm the project was placed in service within the current federal window.
Save the invoice, proof of payment, model details, and any manufacturer documentation.
File Form 5695 Part II for the tax year the property was placed in service.
Keep the documentation in case you need to support the claim later.

There is one more 2025-specific detail worth catching early.

The IRS says that for 2025 property placed in service, no credit is allowed unless the item was produced by a qualified manufacturer and the taxpayer reports the Qualified Manufacturer Identification Number (QMID) on the return. If your installation year is 2025, make sure your contractor or manufacturer documentation actually includes the identification information you will need.

What paperwork should you save?

Keep one folder with:

the final itemized invoice
proof of payment
the installed model number and manufacturer documentation
any eligibility confirmation or qualifying-model evidence
the installation completion date
related rebate paperwork if you stacked programs
your Form 5695 support records

The most common mistake is waiting until tax season to reconstruct the paperwork from email threads, screenshots, and a vague contractor invoice.

Common mistakes homeowners make

Most heat pump tax-credit problems come from one of these mistakes:

assuming every heat pump qualifies
mixing up the install date with the order date
budgeting the full $2,000 before doing the 30% math
treating all rebates as if they affect tax basis the same way
confusing a federal tax credit with an income-based rebate program
failing to save model and manufacturer documentation for a 2025 claim

If your project includes multiple incentives, run the federal credit, the state or utility rebate, and the contractor quote as three separate tracks instead of one blended savings number.

FAQ

Is there a federal income limit for the heat pump tax credit?

There is not a simple household adjusted gross income threshold table that most homeowners use for the federal 25C heat pump credit. The income-limit confusion usually comes from income-based rebate programs, not the federal tax credit itself.

Does a mini-split qualify for the heat pump tax credit?

It can. ENERGY STAR's eligible heat pump list includes both central and ductless systems. The exact model still has to meet the qualification rules for the installation year.

Can I combine the heat pump tax credit with rebates?

Often yes, but not automatically and not with identical tax treatment for every program. Some utility subsidies reduce the qualified cost basis for the credit. Use official program rules and your tax preparer if the stack is large or messy.

What if I bought the heat pump in 2025 but it was installed in 2026?

Do not assume that purchase date protects the credit. The IRS focuses on when the property was installed / placed in service, not when you first paid a deposit or signed the contract.

Can I claim the credit on a second home or as a renter?

Maybe, but this is where the guidance needs to be read carefully. ENERGY STAR says the heat-pump category can include some second-home and renter-paid improvements, while the general IRS page steers most taxpayers to think in terms of a main home. If your situation is not a straightforward primary-residence case, verify the current official guidance before claiming it.

Bottom line

A qualifying heat pump can still earn a valuable federal tax credit, but the useful planning answer is more precise than "30% up to $2,000."

Use this version instead:

The heat pump tax credit is a model-specific, documentation-specific, installed-date-specific federal credit.

If your system was installed in time, the model qualifies, and your paperwork is clean, the credit can materially lower the real cost of the project. If any of those details are fuzzy, pause and verify before you count on the savings.