Upgrading to a heat pump is one of the best ways to cut your heating costs and make your home more energy efficient. However, due to recent changes in federal legislation, there’s an extra reason to act now: the federal tax credit for heat pumps is only available through the end of 2025.
Here’s what we want our members to know:
Why a Heat Pump Upgrade Makes Sense
- Lower heating and cooling bills: Heat pumps are highly efficient and can keep your home comfortable year-round. Read our “Are Heat Pumps Right for You? It depends” blog post to learn more.
- Tax savings & Rebates: The federal tax credit can cover up to 30% of your project cost up to $2,000, but only if your system is installed and operational before December 31, 2025. This is on top of the point-of-sale rebates that we offer as partners of Efficiency Vermont’s Efficiency Excellence Network.
The Deadline: December 31, 2025
- To qualify, your new heat pump must be installed and “in service” by December 31, 2025.
- Projects completed in 2026 or later will not be eligible for this credit.
That means if you’re considering a new system, waiting could cost you $2,000 in lost savings.
How the Credit Works
- Amount: 30% of your project cost (equipment + installation), up to $2,000.
- Other upgrades: If you also add insulation, windows, doors, or other weatherization work, you may be eligible for up to $3,200 total in credits in one year.
- No income limits: The federal heat pump tax credit is available to all homeowners, regardless of income. However, some additional rebates or state programs may have income requirements.
- Nonrefundable: Think of it as a discount on your tax bill. If you owe federal income taxes, this credit reduces that amount. If you don’t owe anything, you won’t get extra money back.
How to Receive the Credit
- Plan ahead: Schedule your heat pump installation with the Energy Co-op of Vermont early to avoid the year-end rush.
- Get it in writing: Keep invoices showing the total cost of equipment and labor.
- File Form 5695: Claim the credit when you file your 2025 taxes.
Act Now to Lock in Your Savings
Heat pump tax credits will expire after December 31, 2025, and once they’re gone, they’re gone.
If you’ve been thinking about upgrading, now is the time. Schedule your installation before the deadline to ensure you don’t leave money on the table.
