Need to upgrade your heating and cooling system? A heat pump might be the perfect solution. Heat pumps are energy efficient, and can save you money on your energy costs. Plus, they qualify for huge savings through the 25C tax credit for heat pumps.
Neeeco can help you take full advantage of the federal tax credit for heat pump installation. We’re a whole-home energy efficiency expert that’s been helping Massachusetts homeowners save energy and money for years.
Keep reading to learn more about the heat pump tax credit and how much it can save you on heat pump installation in 2025.
What Is the Heat Pump Tax Credit?
The heat pump tax credit is part of a larger tax credit, known as the 25C Energy Efficient Home Improvement Tax Credit. It’s been in place for many years but was revamped by the Inflation Reduction Act back in 2022.
The new and improved tax credit is worth 30% of your heat pump installation costs, up to $2,000 per year. Ducted heat pumps, ductless mini split heat pumps, and heat pump water heaters are all eligible for the $2,000 credit.
Who Qualifies for the Heat Pump Tax Credit in 2025?
If you owe federal income taxes, you can benefit from the tax credit for heat pumps in 2025. To be eligible, you must install a qualifying heat pump system at your primary residence in the United States. It must also be an existing home that you’re either improving or adding onto. If you’re building a new home, you’re not eligible for this credit but may qualify for other energy efficiency incentives.
Which Heat Pumps Qualify for the Tax Credit?
Not all heat pumps are eligible for the 25C tax credit. To qualify, your new heat pump must meet or exceed the Consortium for Energy Efficiency (CEE) highest efficiency tier. You can use the ENERGY STAR Product Finder to search for tax credit eligible heat pumps.
If you’d rather not do all that research, just call Neeeco. We’ll help you choose a heat pump that meets eligibility requirements so you don’t have to spend hours analyzing heat pump efficiency standards.
How Does the Heat Pump Tax Credit Work?
The heat pump tax credit reduces what you owe when you file your federal income taxes for the year you install your heat pump.
For example, say you owe $3,000 in federal income taxes. You install a heat pump and receive the maximum credit of $2,000. When you file your tax return, you will subtract the credit amount from what you owe, bringing your total down to $1,000.
Keep in mind that you can only claim the heat pump tax credit for the year you complete your installation. If you sign a contract to install a heat pump in late 2025, for example, but the installation doesn’t take place until early 2026, you will have to wait until you file your 2026 tax return to claim the credit. The sooner you install your heat pump, the sooner you can claim your savings.
How to Claim the Heat Pump Tax Credit
Claiming the heat pump credit is simple. You don’t have to apply for the credit—you simply claim it when you file your taxes.
These are the basic steps you’ll need to follow:
- Step One – Keep all receipts and invoices associated with your heat pump installation.
- Step Two – Complete IRS Form 5695 (skip down to Part Two: Energy Efficient Home Improvement Credit).
- Step Three – Add your tax credit information to your IRS Form 1040.
- Step Four – Make sure you attach Form 5695 when you file.
Disclaimer: We are energy efficiency experts, not tax experts. Always consult a tax professional about your specific situation.
Save More with Mass Save® Heat Pump Rebates
If you live in Massachusetts, you’re eligible for additional heat pump incentives through Mass Save. The Sponsors of Mass Save offer generous rebates for heat pump heating and cooling systems. Incentive amounts vary—to find out how much you can save, schedule a no-cost Home Energy Assessment with Neeeco today!
*Some restrictions apply. Offers are subject to change or cancellation. Visit MassSave.com/HEA for full details.