The federal heat pump tax credit: Everything you need to know & how to file (program expired in 2025)

Important Update: The 25C Energy Efficient Home Improvement Credit, which included the federal heat pump tax credit, officially expired on December 31, 2025. This credit is no longer available for heat pump installations completed in 2026 or later. However, if you installed a qualifying heat pump in 2025 or earlier, you may still be eligible to claim the credit when filing your taxes.

If you're considering a heat pump installation, while the federal tax credit is no longer available, you may still qualify for state rebates, utility incentives, and other energy efficiency programs. Contact Elephant Energy to learn about current incentives in your area.

This guide covers everything you need to know about how the federal heat pump tax credit works, who qualified, and how to claim it for your 2025 taxes.

What was the federal tax credit for installing a heat pump?

The Federal Heat Pump Tax Credit was part of the 25C Energy Efficient Home Improvement Credit, expanded under the Inflation Reduction Act. The program helped make energy-efficient upgrades more affordable by covering 30% of the total cost, up to $2,000 per year, for qualifying heat pumps and heat pump water heaters.

How it worked

This was a non-refundable tax credit, which meant it directly reduced the amount of federal income tax you owed but wouldn't result in a refund. Unused credit amounts could not be carried forward to future tax years.

What was covered under the federal heat pump tax credit?

For installations completed by December 31, 2025, the Federal Heat Pump Tax Credit helped offset the cost of energy-efficient upgrades by covering a portion of your expenses. Eligible homeowners could claim:

• 30% of the total cost, up to $2,000 per year for air-source heat pumps and heat pump water heaters
• $600 for electrical panel upgrades installed with a heat pump
• $1,200 per year for other qualifying energy-efficient improvements, such as insulation and air sealing

Heat pump federal tax credit requirements

To be eligible for the Federal Heat Pump Tax Credit for installations completed before 2026, you must have met the following requirements:

1. Property requirements

• The heat pump must have been installed in an existing home and your primary residence in the U.S.
• New construction and rental properties did not qualify.
• Eligible properties include:
  • Single-family homes
  • Condominiums
  • Mobile homes and manufactured homes
  • Houseboats
  • Cooperative apartments

2. Efficiency requirements

The heat pump must have met the highest efficiency standards set by the Consortium for Energy Efficiency (CEE), including:

• A minimum SEER2 rating of 16 or higher
• Compliance with the CEE’s highest efficiency tier for air-source heat pumps or heat pump water heaters

3. Business use of home

If you used part of your home for business, you could still claim the credit, but it was prorated based on non-business use:

• Up to 20% business use: You could claim the full credit
• More than 20% business use: The credit was proportional to your non-business use

4. Timing and installation requirements

• The heat pump must have been installed and operational by December 31, 2025
• You must claim the credit in the same tax year the installation was completed

Installed a heat pump in 2025? You may still qualify for the federal tax credit

If your heat pump or heat pump water heater was installed and placed in service on or before December 31, 2025, you may still be eligible to claim the Federal Heat Pump Tax Credit when filing your 2025 taxes during the 2026 tax season if all of the following are true:

• The heat pump or heat pump water heater was installed and placed in service on or before December 31, 2025
• The system meets the required efficiency standards under the 25C Energy Efficient Home Improvement Credit
• The system was installed in an existing primary residence in the United States
• You are claiming the credit on your 2025 tax return, filed during the 2026 tax season

How to get your federal tax credit for heat pumps: Claim and filing

If you installed a heat pump or heat pump water heater before 2026, here’s how to get the federal tax credit:

Step-by-step filing guide:

1. Collect your documentation:
   • Save your invoices and receipts showing the total cost of the heat pump installation.
2. Fill out IRS form 5695:
   • Fill out personal information: Enter your Name, Social Security Number, and Main Home’s Address at the top of the form.
   • PART I: Residential clean energy credit: This section is for solar, wind energy, geothermal heat pumps, or battery storage. Skip this if you’re only claiming the heat pump credit.
   • PART II: Energy efficient home improvement credit: This is where you’ll claim the heat pump tax credit, as well as credits for weatherization, electrical panel upgrades, and home energy audits.
   • Continue filling out lines 17 through 32 in Part II.
     • Section A: Qualified Energy Efficiency Improvements
       • In Line 18, enter the total invoice amount for insulation and air sealing.
     • Section B: Residential Energy Property Expenditures
       • In Line 25ab, enter the total invoice amount for electrical panel upgrades.
       • In Line 29abc, enter the total invoice amount for heat pumps and/or heat pump water heaters.
3. Integration with form 1040:
   • Add the relevant tax credit details from Form 5695 to your standard Form 1040 when filing your federal taxes. This ensures the credit is accurately applied to your tax bill.
4. Submission reminder:
   • Attach Form 5695 to your federal tax return (Form 1040) when filing. This is required to claim the credit.
5. Keep your records:
   • Hold onto all documentation, including invoices and certification statements, for at least three years in case of an IRS audit.

Qualified Manufacturer Codes (QMID)

When completing IRS Form 5695 to claim your federal tax credit, you'll need to provide a Qualified Manufacturer Code (QMID) — sometimes referred to as a manufacturer PIN. This code verifies that your heat pump meets the required efficiency standards.

Below are the QMIDs for the manufacturers Elephant Energy commonly installs:

• Mitsubishi: E8X7
• MRCOOL: O5Y7
• Bosch: K3M2
• Bryant: N8H2
• A. O. Smith: A5X5
• Rheem / RUUD: K3A8
• LG: S8T5
• GE: Z0T6

These codes are entered on IRS Form 5695 when claiming the Energy Efficient Home Improvement Credit. If your manufacturer is not listed here, check your installation documentation or contact the manufacturer directly for their QMID code.

Need more details on filing?

For more detailed instructions, check out:

• IRS Instructions for Form 5695
• Energy department guide to federal tax credits

How the federal tax credit was calculated

If you have questions about how the tax credit amount shown on your Elephant Energy proposal was calculated, here's the formula used:

(Total project cost − permit costs − utility incentives) × 30% = tax credit amount
 (capped at $2,000 for heat pumps and heat pump water heaters)

Heat Pump Example

• Total project cost: $25,000
• Permits: $350
• Utility rebate: $7,500

Calculation:
 ($25,000 − $350 − $7,500) × 0.30 = $5,145 → $2,000 credit (annual cap applied)

Heat Pump Water Heater Example

• Total project cost: $7,500
• Permits: $250
• Utility rebate: $2,250

Calculation:
 ($7,500 − $250 − $2,250) × 0.30 = $1,500 credit

The federal tax credit was calculated based on out-of-pocket costs after rebates and incentives and was subject to IRS rules and annual caps.

Additional energy efficiency tax credits

In addition to the heat pump tax credit, the 25C Energy Efficient Home Improvement Credit covered other energy efficiency upgrades for installations completed by December 31, 2025. Pairing these improvements with a heat pump installation helped homeowners maximize their savings while enhancing their home's overall energy efficiency.

Home energy audits

Homeowners could claim a tax credit of up to $150 for a home energy audit conducted on their primary residence. To qualify, the audit had to:

• Include a written report and inspection that identified the most significant and cost-effective energy efficiency improvements, along with estimates of potential energy and cost savings
• Be conducted by a certified home energy auditor to ensure accuracy and credibility

Energy efficiency upgrades

The 25C Energy Efficient Home Improvement Credit also covered other energy efficiency upgrades. Homeowners could claim 30% of the project cost, up to $1,200 per year, for qualifying improvements, including:

• Attic Insulation
• Basement or Crawlspace Insulation
• Air Sealing

Additional resources: rebates and tax credits directory

Looking to maximize your savings? The following will take you to relevant Elephant Energy resources that explain how to make the most of available financial incentives, including rebates and tax credits:

• Making the most of inflation reduction act incentives: Discover how to combine IRA incentives with other rebates for maximum savings.
• Climate-friendly home incentives: Explore incentives for electrifying your home, from heat pumps to EV chargers.
• Colorado State heat pump tax credit: Find out how Colorado residents can save even more with state-specific tax credits.
• Mass Save® rebates: See how homeowners in Massachusetts can benefit from exclusive heat pump rebates through the Mass Save® program.

Why choose Elephant Energy?

Upgrading to a heat pump is a smart way to lower your energy bills, reduce your carbon footprint, and improve your home's comfort. Even without the federal tax credit, many state and utility incentives are still available to help offset the cost of installation.

Elephant Energy makes the process simple and stress-free. Our team handles every detail, from helping you choose the right heat pump to guiding you through every rebate and incentive available in your area.

Ready to maximize your savings? Get an instant estimate to upgrade your home and invest in a more sustainable future.

Frequently asked questions

Can I still claim the federal tax credit if I installed my heat pump in 2025?

Yes, if your heat pump was installed and placed in service on or before December 31, 2025, and meets all eligibility requirements, you can claim the credit when filing your 2025 tax return during the 2026 tax season.

Is the federal tax credit available for installations in 2026?

No, the 25C Energy Efficient Home Improvement Credit expired on December 31, 2025. Heat pump installations completed in 2026 or later are not eligible for this federal tax credit.

Can I combine state rebates with other incentives?

Yes, you can combine state rebates with utility incentives and other local programs. Contact Elephant Energy to learn about current incentives available in your area.

Can I claim the credit if I received a state rebate in 2025?

Yes, but the federal tax credit was calculated on your costs after the state rebate was applied. This means you would get credit for what you actually spent out of pocket.

Do rental properties qualify if I live there part-time?

No, rental properties did not qualify, even if you lived there part-time. The heat pump had to be installed in your primary residence.

What if I didn't owe enough in taxes to use the full credit in 2025?

The 25C credit was non-refundable, so it could only reduce your tax bill to zero, not below. Any unused portion of the credit could not be carried forward to future tax years.

What incentives are available now for heat pump installations?

While the federal tax credit has expired, many state rebates, utility programs, and local incentives are still available. Contact Elephant Energy to learn about current programs in your area.

Disclaimer:

This guide is for informational purposes only and should not be considered tax advice. Individual tax situations can vary, so it’s recommended to consult a licensed tax professional for personalized guidance. Elephant Energy does not assume liability for your specific tax circumstances.