Why Are the Federal Heat Pump Tax Credits Ending?

Why Are the Federal Heat Pump Tax Credits Ending?

The federal tax credit for heat pumps under Sections 25C (for air‑source heat pumps and water heaters) were introduced as part of the 2022 Inflation Reduction Act, originally set to run through 2032.

However, a major tax and spending bill passed by Congress in mid‑2025 — informally known as the "One Big Beautiful Bill" — significantly rolled back these incentives. It eliminates the 25C credits effective December 31, 2025.

What the Deadline Means for You

If You’re Thinking About Installing a Heat Pump

• You can still claim the federal tax credit of up to $2,000 under Section 25C, for air‑source heat pumps and heat pump water heaters, if both purchase and installation are completed before December 31, 2025.
  
  
• After December 31, 2025, these tax credits disappear, and no new heat pump system installations will qualify under these federal programs unless new legislation passes. 

If You Already Have a Heat Pump

• You cannot retrofit your existing system to claim the credit after December 31, 2025..
  
  
• And if you're planning any additional eligible updates—like a heat pump water heater — you must complete those in 2025. 

Why Act Now — Don't Wait Until Winter

There is limited time, and demand is already mounting:

• HVAC contractors across the U.S. are already reporting full schedules as homeowners rush to complete installations before the cutoff.
  
  
• Permits, equipment lead times, loan or rebate approvals (such as Mass Save or HEAT Loan financing), and seasonal availability can add weeks to your heat pump project. 

What to Do Next

If you're considering a heat pump:

1. Get started now by contacting a reputable HVAC contractor
   
   
2. Ensure your system is fully installed and turned on before December 31, 2025.
   
   
3. Keep all documentation like invoices and the project proposal — and plan to be asked to upload those when you are completing your taxes in 2026. 

Long-Term Value Beyond Tax Credits

While the federal credit expiration is significant, remember:

• Heat pumps offer major energy savings, year-round comfort, and carbon footprint reduction — benefits that extend well beyond tax incentives.
  
  
• In Massachusetts, you can still stack Mass Save rebates, 0 % HEAT loans, and other incentives on top of the federal credit — if installation is completed in time.

Final Thoughts

If you're planning to install a heat pump, make sure it’s fully installed by December 31, 2025. That is your last opportunity to claim valuable federal tax credits: up to $2,000.

For homeowners who already have qualifying heat pumps, enjoy the benefits, and remember this is the final window for any additional eligible investments to your heat pump system under these tax credits.

Time is short, so start now. Get consultations, lock in your contractor, and complete installations before the December 31, 2025 deadline. After 2025, these federal heat pump tax credits vanish.