The Federal Heat Pump Tax Credit: Everything You Need To Know in 2026

The 25C Energy Efficient Home Improvement Credit expired on December 31, 2025, but you may still have time to file

TL;DR:

The federal heat pump tax credit officially expired on December 31, 2025 (along with the other provisions of the 25C Energy Efficient Home Improvement Credit). If you’re eligible for the tax credit and haven’t filed your 2025 taxes, here’s what you need to know about how the tax credit worked, who’s qualified, and how to claim it on your 2025 taxes. And there is other help for Massachusetts homeowners in paying for and saving money with a heat pump, including rebates, incentives, and a lower electric rate during the winter. Contact McMahon Plumbing & Heating to learn about current incentives in Massachusetts.

Federal tax credit for installing a heat pump

The Section 25C Energy Efficient Home Improvement Credit originated in the late 1970s and was designed to encourage homeowners to make energy efficient improvements by reducing their upfront costs. It expired in 1985 and was reinstated by the Energy Policy Act of 2005. In 2022, the Inflation Reduction Act was passed and included many tax credits and other financial instruments aimed at encouraging renewable energy and energy efficiency. This included a dramatic boost to the heat pump tax credit: Between 2023 and 2025, Section 25C covered up to 30% of the cost of installing qualifying air source heat pumps or heat pump water heaters, up to $2,000.

Could you get a tax credit?

Homeowners who installed a heat pump in 2025 may have been able to claim up to $3,200 on their tax return. It’s worth noting that the credit was non-refundable, which means it could reduce a homeowner’s tax bill all the way down to zero, but no further. If the credit was larger than the total amount of tax owed, the leftover amount couldn’t be paid out as a refund or carried over to a future tax year. That said, the credit could still increase a refund someone was already getting: if a homeowner had too much tax withheld from their paychecks during the year, lowering their tax bill with the credit meant more of that withholding came back to them.

What was covered?

Here’s more specifically what the Section 25C credit covered:

Can you still claim the heat pump federal tax credit?

What do you need to be eligible for the tax credit, and is it too late to claim it? The tax credit covered installations completed before 2026. If you had a heat pump installed in 2025 and you filed an extension on your 2025 taxes, you may still be able to claim the tax credit.

To claim the Section 25C tax credit you must:

Did the federal heat pump tax credit expire?

Yes. The Section 25C federal tax credit for heat pump installations expired at the end of 2025.

Are there still heat pump incentives in Massachusetts?

Yes! Mass Save® still offers rebates and zero-interest Heat Loans.

Do heat pumps make sense for homes with natural gas?

In some cases, heat pumps can supplement natural gas systems during mild weather or help address specific comfort issues, even if full replacement is not immediately cost-effective.

Heat pump tax credit eligibility requirements

The tax credit applied only for certain types of homes and certain types of heat pumps. Here are the details:

2025 tax filers: How to claim and file for your federal heat pump tax credit

If you filed an extension for 2025 and you’re planning to claim the tax credit, you’ll need the following documentation.

• Your invoices and receipts showing the total cost of the heat pump installation. (If McMahon installed your heat pump, feel free to contact us for a copy of your receipt).
• Fill out IRS form 5695 . You’ll claim the tax credit in part II, “Energy efficient home improvement credit.”
• Qualified Manufacturer Identification Number (QMID). The IRS implemented the Qualified Manufacturer program to cut down on non-compliant tax claims. You will need to enter the manufacturer’s exact 4-character QMID number on Form 5695.

Here are the QMID numbers for leading heat pump and heat pump water heater manufacturers:

This article is general information, not tax advice. McMahon Plumbing & Heating isn’t a tax advisor — confirm your eligibility and QMID, and consult a qualified tax professional before filing. See the IRS Energy Efficient Home Improvement Credit page for official guidance.

Detailed instructions on filing can be found here:

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

Additional energy efficiency tax credits

The 25C Energy Efficient Home Improvement Credit covered more than just heat pump upgrades. Homeowners could receive tax credits for:

Benefits to installing a heat pump in 2026

Are you thinking of installing a heat pump in 2026? Although the Section 25C tax credit is no longer available, there are some important ways to save both on installation costs and later energy use.

Rebates and incentives

Massachusetts homeowners can take advantage of rebates and incentives to help cover the cost of heat pump installation. The best and easiest way to do this is to work with a Mass Save Heat Pump Installer such as McMahon Plumbing and Heating. We handle the incentives for you on a turn-key basis, working with our parent company, Paradigm Energy Services, an energy services company serving homes and multifamily buildings throughout Massachusetts.

Most incentives are built for heat pump systems that fully replace your existing heating system — but you don’t have to go all-in to benefit. There are also incentives available for mini-splits or heat pumps added to supplement the heating system you already have.

Lower electric rates during the winter

From November through April, Massachusetts heat pump owners pay lower electric rates. Administered by Eversource, National Grid, and Unitil, the Seasonal Heat Pump Winter Rate discounts the delivery charges on your electric bill and has the potential to save you $70-$140 per month. (Eversource customers also receive a discount on their transmission charges.) If you received a MassSave incentive on a heat pump system installed after 2019, you’re automatically enrolled. If you’re not enrolled, you can enroll your system here. https://www.mass.gov/info-details/residential-electric-seasonal-heat-pump-rates#self-enrollment The rate applies to heat pumps used for space heating, not to heat pump water heaters.

Bottom line?

There are many reasons (besides savings) to install heat pumps. They’re a two-in-one system, offering heating and cooling. You can reclaim the space taken up by window air conditioners or bulky indoor equipment. Upgrading from oil-fired equipment also upgrades your indoor air quality, and you won’t have to wait for fuel deliveries in the winter.

But there are also significant financial benefits to installing a heat pump in your home, even without the 25C tax credit. Contact us today if you would like a free estimate for a heat pump!

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