Heat Pump Federal Tax Credit Changes: What Homeowners Should Know
- Categories: Company News, Heat Pumps, Rebates & Incentives, Resources
Signed into law in 2022, the Inflation Reduction Act (IRA) introduced a range of energy efficiency incentives for homeowners, including the popular 25C Federal Tax Credit for qualifying heat pump installations. With the passage of the Big Beautiful Bill in July 2025, many of these incentives are scheduled to change.
Here’s what homeowners should know to make informed decisions regarding related home improvement projects.
Current Federal Tax Credits for Heat Pumps (as of 2025)
Under the Inflation Reduction Act, homeowners who install qualifying cold climate heat pumps are eligible for a federal tax credit of 30% of the installation cost, up to $2,000.
Additional tax credits are also available for related upgrades:
- Up to $1,200 for duct sealing (commonly performed during central AC/heat pump installations)
- Credits for electrical service upgrades may also apply, depending on the project
How Are Heat Pump Tax Credits Changing in 2026?
Beginning January 1, 2026, the federal tax credit for heat pump installations will no longer be available due to provisions in the Big Beautiful Bill.
The federal tax credits for the following projects are also scheduled to end January 1st, 2026:
- Duct sealing
- Electrical service upgrades
- Solar energy systems
- Home weatherization (insulation)
and more.
What This Means for Homeowners
If you’ve been considering a heat pump installation, 2025 is likely the last year to take advantage of the federal tax credit. For those weighing whether to move forward this year (2025) or wait until next, this change may influence your project timeline.
To qualify for a federal tax credit for your heat pump project, your installation must be completed and paid for by December 31st, 2025.
That said, there’s no need to panic or rush your decision. While the federal tax credit will be phased out, Massachusetts residents still have access to valuable local rebates through programs such as Mass Save and municipal energy programs, even in 2026.
In Summary
- Federal tax credits will not be available for heat pumps after December 31, 2025
- Local rebates, such as the Mass Save® Program are not directly impacted by the Big Beautiful Bill or other federal legislation
As always, we recommend speaking with a trusted contractor who understands both federal and local incentive programs to help you plan your project and get the most out of available savings.
Let us know if you have any questions. We are here to help!
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