30% federal credit up to $2,000/year on qualifying heat pumps under IRA. Includes IRS Form 5695, AHRI listing requirement, and state stacking (e.g., HEEHRA rebate).
Detailed instructions, formula notes, and US-context guidance shown in the calculator above.
Disclaimer: Estimate only. Consult a qualified professional for decisions with major financial, legal, or health consequences.
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Calculator information
📋 How to use this calculator
- Enter total qualifying heat pump cost (equipment + installation labor).
- Verify the unit is AHRI-certified and meets Energy Star efficiency for your climate zone.
- Select your tax filing status and enter MAGI (if applicable for HEEHRA rebates).
- Check whether your state offers HEEHRA rebate stacking (state-administered, income-tiered).
- Review the 30% federal credit (Section 25C, $2,000/yr cap on heat pumps) + state rebate.
🧮 Section 25C Energy Efficient Home Improvement Credit
Credit = min(0.30 x Heat_pump_cost, $2,000) [annual cap, heat pump category]
- Section 25C: 30% credit, total annual cap $1,200 baseline + $2,000 separate for heat pumps/heat pump water heaters/biomass
- Heat pump must meet HIGHEST CEE tier OR be Energy Star qualified for your region
- Air-source, geothermal/ground-source, and heat pump water heaters all qualify
- AHRI certification required (look up at AHRIdirectory.org)
- Property must be your principal residence (not rental, not second home)
Section 25C heat pump credit STACKS with HEEHRA (High-Efficiency Electric Home Rebate Act). HEEHRA = state-administered rebate, income-tiered: 100% rebate for <80% AMI, 50% for 80-150% AMI, none above. Rebate caps: $8,000 heat pump, $1,750 heat pump water heater. Stack federal + state for total cost reduction up to 100% for low-income households.
💡 Worked example: $15K ductless mini-split heat pump system, AHRI-certified
Given:- Total cost (equipment + install): $15,000
- Unit: Mitsubishi Electric HP Z-series (AHRI-certified, Energy Star)
- Location: Pennsylvania (cold climate spec — heating performance required)
- Filing status: MFJ, MAGI $120K (above HEEHRA threshold)
- Property: principal residence
Steps:- 30% credit: $15,000 x 30% = $4,500
- Section 25C heat pump annual cap: $2,000
- Credit allowed: $2,000
- PA does not have a HEEHRA program live as of 2026 (state still ramping)
- Net after federal credit: $15,000 - $2,000 = $13,000
Result: $2,000 federal tax credit. If you also replace insulation or install a heat pump water heater the same year, separate caps apply ($1,200 baseline + $2,000 heat pump) — can layer multiple improvements.
❓ Frequently asked questions
Is the $2,000 cap per heat pump or per year?
Per YEAR. The heat pump category cap ($2,000) AND the baseline cap ($1,200 for other improvements) reset every year — you can claim Section 25C credits annually with no lifetime cap (changed from old §25C which was capped at $500 lifetime). Strategy: spread big projects across multiple tax years (insulation Y1, heat pump Y2, water heater Y3) to maximize total credit recoverable.
What's the difference between Section 25C and HEEHRA?
Section 25C: federal TAX CREDIT, claimed on Form 5695, applies regardless of income, 30% of cost up to caps. HEEHRA: federal REBATE administered by state energy offices, applies UP-FRONT (cash at point of sale, no need to wait for tax filing), income-tiered (free for <80% AMI, 50% for 80-150% AMI), rebate not tax credit. The two STACK — claim 25C credit on your tax return AND get the state HEEHRA rebate at install. Combined effective cost reduction can be 50-100% for qualifying households.
Does my state offer HEEHRA?
Rolling rollout 2024-2026. Active programs include New York's NYSERDA HEEHRA ($8K cap), California's EPSC Equitable Building Decarbonization ($14K cap), Maine, Vermont, Washington state. Many states still finalizing application portals. Check your state energy office or efile.com state-by-state tracker for current status. Some programs ran out of allocated funds in 2025 — apply early when re-funded.
Does air conditioning replacement count as heat pump?
Only if the equipment is a 'reversible' heat pump (heating + cooling), not a standard AC-only system. Modern Energy Star heat pumps work in cold climates down to -15°F and replace both AC and furnace. Cold-climate certified units (NEEP CCASHP) are best for Northern states. If you only need cooling, central AC qualifies under separate Section 25C category but lower cap ($600/yr).
Should I install a heat pump if I have free natural gas heat?
Economics depend on utility prices. In high-electricity / low-gas regions (Northeast, Midwest with old gas hookups), heat pump operating cost may EXCEED gas furnace cost. But: $2K-$10K in stacked tax credits + state rebates may justify the swap from emissions standpoint or future-proofing. In high-gas / low-electricity regions (TX, CA), heat pumps clearly win operating economics. Calculate your specific utility rates with our electricity cost calculator.
📚 Sources & references
Last updated: May 23, 2026