Home Energy Efficiency and Heat Pump Tax Credits

Homeowners can get rebates, tax credits, and financing assistance to install heat pumps and make other home energy-efficiency upgrades. Various sources fund these financial incentives, including the federal government, state and local governments, and utility companies. Weatherization and home energy improvements can reduce a homeowner’s energy usage, cut greenhouse gas emissions, and lower the burden on energy infrastructure during peak usage.

Many of these tax credits and rebates have limited funding, and the incentives can change or expire quickly. The federal 25C tax credit for heat pumps expired on December 31, 2025. However, some states and public utilities continue to offer heat pump system incentives. To see if you qualify for current energy tax credits, talk to a local tax attorney about your options.

How Can Homeowners Claim Energy Tax Credits?

Various tax incentives and rebate programs help homeowners offset the costs of energy-efficient home improvements. Tax incentives and credits can shorten the payback period by helping annual energy savings cover the cost of heat pump installation, solar panels, and weatherization upgrades.

Weatherization, energy-efficiency, and renewable-energy updates can help homeowners use less energy. This not only saves homeowners money but also reduces the risk of brownouts from excess demand on electricity grids and provides jobs for contractors.

Energy tax credits, rebates, and incentives come from federal tax incentives, state tax incentives, local funding, and public utility programs. These energy incentives vary widely, depending on the type of energy efficiency upgrades and where the homeowner lives. Review your state, municipal, and utility programs to see which energy upgrades qualify for tax or rebate incentives.

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Energy Efficient Home Improvement Credits

Before investing in energy upgrades, be aware that the federal Energy Efficient Home Improvement Credit and Residential Clean Energy Credit expired on December 31, 2025. The home energy and clean energy tax credits were part of the Inflation Reduction Act of 2022. The One Big Beautiful Bill Act of 2025 accelerated the expiration of the energy credits for homeowners. The IRA clean energy credits were originally set to phase out in 2033.

The Energy Efficient Home Improvement Credit provides a federal tax credit of 30% of the costs of making energy-efficient home upgrades, up to $3,200 in annual credits through 2025. This included up to $2,000 for biomass stoves, heat pump water heaters, and air source heat pumps. Homeowners were eligible for up to $1,200 for energy-efficient home improvements, including:

• Exterior doors, windows, and skylights
• Insulation
• Water heaters (including solar water heaters)
• Gas furnaces, hot water boilers, and HVAC systems
• Electric panel upgrades
• EV chargers
• Central air conditioners and mini-splits

The Residential Clean Energy credit provided an additional 30% tax credit for clean energy equipment, including rooftop solar energy systems, fuel cells, wind turbines, battery storage, and geothermal heat pumps. The credit applied to qualified solar electric, solar water heating, fuel cell, small wind energy, geothermal heat pump, and battery storage property.

To qualify, taxpayers claimed the credits on their tax return using Form 5695 for the tax year in which they made the upgrades (by December 31, 2025). For 2025, the Energy Efficient Home Improvement Credit generally applied to a taxpayer’s principal residence, while the Residential Clean Energy Credit generally also applied to a qualifying second home in the United States, except that fuel cell property had to be installed at the taxpayer’s principal residence.

To maximize the tax savings, the government recommended getting a home energy audit to identify the most cost-effective energy improvements.

Federally Funded HOMES and HEAR Energy Upgrades

Starting in 2026, homeowners may be eligible for energy savings rebates through federally funded but state-operated plans. However, funding concerns and rule changes have delayed the rebate program rollout.

Previously approved energy upgrade options have been reversed, including fossil fuel-to-electric upgrades, which are no longer eligible for rebates. Get legal advice before you make upgrade plans based on promised rebate programs.

The Home Owner Managing Energy Savings (HOMES) Rebate provides up to $8,000 on home upgrades that provide a minimum savings of 20%. Eligible HOMES upgrades include air sealing, water heaters, duct sealing, and Energy Star appliance upgrades. HOMES rebates are available to all homeowners, with no income restrictions. However, lower-income households are eligible for higher rebates.

The High-Efficiency Electric Home Rebate (HEEHR) program provides rebates for installing energy-efficient appliances and making weatherization upgrades to reduce energy consumption. Homeowners can claim HEAR rebates through their contractors or at the point of sale. HEAR rebates are available for low-to-moderate-income households. The maximum amount a homeowner can claim for HEAR rebates is $14,000, with maximum rebates of:

• $8,000 for heat pumps
• $1,750 for heat pump hot water heaters
• $4,000 for electric service panelboard upgrades
• $2,500 for electric wiring upgrades
• $1,600 for insulation and air sealing
• $840 for qualifying appliances

HOMES and HEAR rebates are federally funded but administered through state programs. Each state has a different process and rollout period. States must submit their proposed programs to the Department of Energy for approval. Most states have had their programs approved but not yet launched. Many states with active programs lack the funding to provide homeowners with the promised rebates.

State and Public Utility Heat Pump and Weatherization Incentives

Many states and public utilities provide weatherization and heat pump incentives to homeowners. These incentives vary by state, municipality, and the homeowner’s energy utility provider.

For example, Colorado offers a $1,000 rebate for heat pumps, and New Jersey offers a cash-back program for up to $7,500 for qualifying heat pump installation. States like Texas and Missouri have no state-level heat pump rebate program, but some regional public utilities offer local incentives.

Eligibility for heat pump and weatherization incentives generally requires:

• Resident or owner of the home getting the upgrade
• Qualifying HSPF2 rating or SEER2 rating for energy efficiency
• Restricted backup heating settings
• Limited to one rebate or incentive per upgrade

Many rebate, installation, and energy assessment programs are for qualifying low- to middle-income households only. Check with your local state, municipality, or utility company to see if you qualify for energy efficiency credits.

State-by-State Incentives

The following table shows heat pump and weatherization incentives for homeowners by state.

Legal Help with Claiming Energy Credits

Many homeowners face issues claiming energy upgrade credits because funding for state and federal programs can change or expire at any time. Many heat pump and weatherization incentives come from local utility programs, which have requirements separate from state or federal programs.

Before making energy upgrades with a new heat pump, insulation, or new windows, find out what federal, state, and municipal incentives are available. Contact a tax lawyer for legal advice on claiming tax credits for energy efficiency upgrades.