The Section 25C federal tax credit for air source heat pumps expired on December 31, 2025. That $2,000 incentive is no longer available for heat pumps installed this year or later.
But if you had a qualifying system installed before that deadline, the credit is still yours to claim on your 2025 federal tax return. You’re filing that return right now, during the 2026 tax season. The money is still on the table.
After manufacturing air filters for over a decade and helping more than two million households protect the air inside their homes, we’ve watched this question come up constantly: what happens to my heat pump tax credit in 2026? The answer depends on when your system was installed and which incentive programs your state has launched since.
For homeowners who installed a qualifying heat pump by December 31, 2025, the Section 25C Energy Efficient Home Improvement Credit covered up to $2,000 of that project. For homeowners considering a new heat pump this year, meaningful alternatives like the Home Electrification and Appliance Rebates (HEAR) program may still apply, depending on where you live and your household income.
We’ve organized everything below: what the credit covered, who can still file for it, how to claim it step by step, and what comes next for 2026 buyers. Whether you’re filing your 2025 taxes now or planning a new installation this year, this is everything you need to know.
Important: This content is for informational purposes only and does not constitute tax advice. Tax laws are complex and individual situations vary. Always consult a qualified tax professional before making decisions based on tax credit eligibility.
TL;DR Quick Answers
The federal Section 25C tax credit expired at the end of 2025. You can still claim up to $2,000 for heat pumps installed in 2025 using IRS Form 5695 and the manufacturer’s QMID. New 2026 installations aren’t eligible, but income-eligible households may get up to $8,000 through state-run HEAR program rebates. Filter choice still matters: a clean MERV 8–MERV 11 filter keeps your heat pump efficient.
Top Takeaways
The Section 25C federal tax credit for air source heat pumps expired December 31, 2025. New 2026 installations do not qualify.
If your qualifying heat pump was installed by December 31, 2025, you can still claim up to $2,000 on your 2025 tax return (filed in 2026).
You must use IRS Form 5695 and report the manufacturer’s QMID to claim the credit for a 2025 installation.
The Section 25C credit is non-refundable. You can only claim up to what you owe in federal income taxes, and you cannot carry unused credit forward.
For new 2026 heat pump installations, explore HEAR program rebates (up to $8,000 for income-eligible households) and local utility programs.
Whatever incentives apply, your new heat pump’s efficiency depends on proper HVAC filtration. The right MERV-rated air filter protects your investment from day one.
What Was the Federal Tax Credit for Air Source Heat Pumps?
The Inflation Reduction Act of 2022 expanded the Section 25C Energy Efficient Home Improvement Credit to cover a wide range of energy-efficient home upgrades, including air source heat pumps. It became one of the most valuable HVAC-related tax incentives ever offered to American homeowners.
Here’s how it worked for qualifying air source heat pumps:
Credit amount: 30% of total qualifying project costs, including labor, up to $2,000 per year.
Annual cap: Heat pumps had their own separate $2,000 annual limit, above and beyond the $1,200 cap that applied to other improvements.
Combined maximum: Homeowners could potentially claim up to $3,200 in a single tax year ($2,000 for heat pumps plus $1,200 for other improvements).
Non-refundable: The credit could only reduce your tax bill. It could not exceed the amount you owed in federal income taxes, and you could not carry unused credit forward to future years.
No income limit: All household income levels were eligible, as long as you owed federal income taxes.
Expiration: All Section 25C credits expired December 31, 2025.
To qualify, an air source heat pump had to meet or exceed the highest efficiency tier (excluding the advanced tier) established by the Consortium for Energy Efficiency (CEE) that was in effect at the beginning of the year it was installed. Starting January 1, 2025, ENERGY STAR Most Efficient designation became the practical pathway to eligibility, with two qualifying routes: one for cold climate/heating-dominated applications and one for cooling-dominated and dual-fuel systems.
Can I Still Claim the Credit in 2026?
YES, if your heat pump was installed and placed in service by December 31, 2025. You claim the credit on your 2025 tax return, which you are filing now in the 2026 tax season. The money is still available.
The key rule under Section 25C: you claim the credit for the tax year in which the qualifying property was installed and placed in service, not the year you purchased it. That means:
If your heat pump was fully installed by December 31, 2025, it qualifies for your 2025 tax return.
If your heat pump was installed on January 1, 2026 or later, it does not qualify for any federal 25C credit.
“Placed in service” means the unit is fully operational in your home. Purchasing or ordering alone does not count.
How to Claim the Heat Pump Tax Credit on Your 2025 Tax Return
Here is the step-by-step process for claiming the Section 25C credit for a qualifying 2025 heat pump installation:
Confirm your installation date. Verify that your heat pump was fully installed and operational by December 31, 2025. The installation date on your invoice is your documentation.
Verify CEE efficiency compliance. Your heat pump must meet or exceed the CEE highest efficiency tier (excluding the advanced tier) in effect at the beginning of 2025. Your contractor or the ENERGY STAR Product Finder can confirm eligibility.
Obtain your QMID. For 2025 installations, IRS rules require you to report the Qualified Manufacturer Identification Number (QMID) on Form 5695. Contact your manufacturer or installer if you don’t have this four-digit code.
Subtract rebates and incentives. Before calculating your credit, subtract any utility rebates, state incentives, or manufacturer discounts from your total project cost. The credit applies to your out-of-pocket cost only.
Complete IRS Form 5695. Fill out Part II of Form 5695 (Residential Energy Credits) for the Energy Efficient Home Improvement Credit. Enter the QMID and your qualifying costs on the appropriate lines.
File with your 2025 federal tax return. Attach Form 5695 to your standard federal return. You do not need to itemize deductions. You can claim the standard deduction and still take this credit.
Keep your records. Retain all invoices, receipts, model numbers, efficiency certifications, and QMID documentation in your files for as long as the IRS may require.
Consult a qualified tax professional to confirm your eligibility and calculate your specific credit amount.
What Qualifies an Air Source Heat Pump for Section 25C?
Not every heat pump qualifies. Here are the key eligibility requirements that applied to 2025 installations:
CEE Efficiency Standard: The unit must meet or exceed the CEE highest efficiency tier (not including the advanced tier) in effect at the start of the year it was installed.
ENERGY STAR Most Efficient Designation: Beginning January 1, 2025, heat pumps recognized as ENERGY STAR Most Efficient were eligible. Two pathways existed: cold climate (heating-dominated) or cooling-dominated/dual-fuel applications.
Qualified Manufacturer: For 2025 installations, the heat pump must have been produced by a manufacturer registered as a Qualified Manufacturer (QM) with the IRS.
Existing primary or secondary residence: The heat pump must be installed in an existing U.S. home. New construction does not qualify. The home must be your main home (primary residence).
Matched system requirement: For split systems, both indoor and outdoor components must be rated as a matched system.
Not for rental properties: Rental properties do not qualify, even if you live there part of the year.
No income limit: Any federal taxpayer who owed federal income taxes was eligible. There is no income cap on the 25C credit.
What Incentives Replace the Federal Tax Credit for New Heat Pumps in 2026?
The 25C credit is gone for new installs. That doesn’t mean all savings pathways are closed. Here’s where to look.
The HEAR Program (Home Electrification and Appliance Rebates)
The HEAR program, authorized under the Inflation Reduction Act, provides point-of-sale rebates for high-efficiency electric upgrades, including heat pumps. Individual state energy offices administer the program. Key details:
Up to $8,000: Maximum rebate for qualifying heat pump installations (space heating and cooling).
Income-based: Households at or below 80% of area median income (AMI) are eligible for full rebates. Households between 80% and 150% AMI are eligible for 50% rebates.
State-administered: Programs vary significantly by state. Some states have launched programs, and others are still in development. Check your state energy office for current availability.
Combined household cap: $14,000 per household across all HEAR program upgrades.
State Energy Office Programs
Many states offer their own rebates and incentives for high-efficiency heat pump installations, independent of federal programs. Visit the Database of State Incentives for Renewables and Efficiency (DSIRE) at dsireusa.org to search by state.
Utility Company Rebates
Local utilities frequently offer rebates for ENERGY STAR-rated variable-speed heat pumps with high SEER2 and HSPF2 ratings. Contact your utility provider directly to ask about current rebate programs in your service area.
The Air Filter Connection: Why Heat Pump Efficiency Starts with Filtration
Most heat pump owners don’t realize this until the energy bills start climbing: your air source heat pump is only as efficient as the air it can move. Nothing restricts that airflow faster than the wrong air filter or a filter that’s long overdue for replacement.
After manufacturing HVAC air filters for over a decade and working with millions of customers who have upgraded their HVAC systems, we’ve seen this play out countless times. A homeowner invests thousands in a high-efficiency heat pump, then undermines that investment with a filter that creates excessive static pressure, restricts duct airflow, and forces the system to work harder than it should.
Heat pump systems are particularly sensitive to airflow restrictions because they operate across both heating and cooling cycles year-round. Unlike a traditional furnace or AC unit that runs seasonally, a heat pump is working in every month of the year. That continuous operation makes filter replacement matter even more.
Here’s what to know about air filtration and heat pump performance:
MERV Rating Scale: MERV stands for Minimum Efficiency Reporting Value. It measures a filter’s ability to capture particles across a range of sizes, from dust and pollen to pet dander and mold spores. The higher the MERV rating, the finer the filtration.
Best MERV Range for Heat Pumps: A MERV 8 to MERV 11 filter delivers strong filtration efficiency for most residential heat pump systems. This range removes dust, pollen, pet dander, and particulate matter while preserving adequate airflow and keeping static pressure in check.
HEPA vs. MERV for Whole-Home Systems: HEPA filters offer maximum particulate removal, but they are not designed for residential HVAC duct systems. Their high resistance significantly restricts airflow and raises static pressure, which can damage your heat pump’s blower motor over time. For whole-home air filtration, a MERV-rated filter is the right choice.
Airflow Optimization: Proper airflow through your duct system is fundamental to heat pump efficiency. Restricted duct airflow forces the compressor to run longer, increasing energy costs and mechanical wear. Regular filter replacement, every 30 to 90 days depending on household conditions, is the single most impactful maintenance step you can take.
Filter Replacement Frequency: Homes with pets, allergy sufferers, or high dust levels should replace filters every 30 days. Average households can typically extend to 60 to 90 days. When in doubt, check your filter. If it’s visibly gray, it’s time.
For a deeper understanding of how air filtration works and why filter ratings matter, see our reference guide at Wikipedia: Air Filter.
Pro Tip: The $20 filter you skip replacing is the hidden cost that quietly undermines a $10,000 HVAC investment. A clean, properly rated MERV filter doesn’t just protect air quality. It protects the efficiency rating your heat pump’s manufacturer warranty depends on.
“We’ve manufactured the filters that go inside millions of heat pump systems, and the pattern is always the same: the homeowners who protect their investment with the right MERV-rated filter, replaced on schedule, get the efficiency and air quality their system was built to deliver. The ones who don’t end up paying more in energy costs than any expired tax credit would have saved them.”
Essential Resources
Whether you’re claiming your 2025 credit or exploring what’s available for a new installation this year, these are the authoritative sources we recommend. After helping more than two million households make informed HVAC decisions, we know which resources actually answer the questions homeowners ask. Every link has been verified as of the date of this publication.
1. Confirm Your 25C Credit Eligibility and Filing Requirements
The IRS’s official Section 25C page covers everything you need to confirm: credit amounts, qualifying property, the QMID reporting requirement, and how to calculate your allowable credit after subtracting rebates.
Source: IRS.gov — Energy Efficient Home Improvement Credit
2. Get Line-by-Line Instructions for IRS Form 5695
Form 5695 is where your heat pump credit lives. The IRS’s official instructions walk you through Part II, including where to enter your QMID, how to report qualifying costs, and how the $2,000 cap applies to your specific situation.
Source: IRS.gov — Instructions for Form 5695 (2025)
3. Verify Whether Your Heat Pump Model Qualified Under CEE Standards
ENERGY STAR’s dedicated heat pump tax credit page explains exactly which efficiency tiers qualified for Section 25C. Use the Product Finder tool to confirm whether your specific model met the 2025 CEE requirements before filing.
Source: ENERGYSTAR.gov — Air Source Heat Pumps Tax Credit
4. Review the IRS’s Own FAQ on 25C Credit Rules
This IRS fact sheet answers the detailed questions homeowners and tax professionals ask most: Can I include labor costs? What happens with shared ownership? How does the QMID requirement work for 2025 installations?
Source: IRS.gov — Fact Sheet fs-2025-01: Energy Efficient Home Improvement Credit FAQs
5. Check HEAR Rebate Availability in Your State
The DOE’s home energy upgrades portal is the starting point for finding out whether your state has launched its HEAR program. It includes current rebate amounts, income eligibility thresholds, and links to your state energy office.
Source: Energy.gov — Home Upgrades & Financial Incentives
6. Understand How Air Source Heat Pumps Deliver Energy Savings
The DOE’s air source heat pump guide explains how these systems transfer heat instead of generating it, why proper installation and filter maintenance are critical, and how efficiency ratings like HSPF2 and SEER2 translate to real energy savings.
Source: Energy.gov — Air-Source Heat Pumps
7. Learn Why Indoor Air Quality Starts with Your HVAC Filter
The EPA reports that Americans spend approximately 90% of their time indoors, where pollutant concentrations can run 2 to 5 times higher than outdoor levels. This resource explains why proper HVAC filtration is a front-line defense for your family’s health.
Source: EPA.gov — Indoor Air Quality
Supporting Statistics
All statistics below come from U.S. government agencies. After serving more than two million households and manufacturing HVAC filters for over a decade, we’ve seen these numbers play out in real homes, with real families, across the country.
Statistic 1: Heat Pumps Can Cut Heating Electricity Use by Up to 75%
According to the U.S. Department of Energy, today’s air source heat pumps can reduce electricity use for heating by up to 75% compared to electric resistance systems like furnaces and baseboard heaters. In our experience, homeowners who pair that efficiency with a properly rated MERV filter and a consistent replacement schedule see those savings hold year after year.
Source: Energy.gov — Heat Pump Systems
Statistic 2: Americans Spend 90% of Their Time Indoors
The EPA reports that Americans spend approximately 90% of their time indoors, where concentrations of some pollutants are often 2 to 5 times higher than typical outdoor levels. That’s exactly why we’re so focused on filtration. Your heat pump moves the air you breathe every day. A clean, correctly rated filter is the most direct way to protect your family from what you can’t see.
Source: EPA.gov — Report on the Environment: Indoor Air Quality
Statistic 3: $8.8 Billion Authorized for Home Energy Rebate Programs
The Inflation Reduction Act authorized $8.8 billion for the HEAR and HOMES rebate programs, administered by state energy offices to provide point-of-sale rebates for energy-efficient upgrades including heat pumps. For homeowners who missed the 25C deadline, these state-level programs represent the most significant alternative savings pathway available in 2026.
Source: Energy.gov — Home Energy Rebates Program Requirements
Final Thoughts & Opinion
The expiration of the Section 25C heat pump tax credit is genuinely disappointing. A $2,000 federal credit made a meaningful difference for millions of families making the leap to high-efficiency, all-electric heating and cooling. We’ve seen that firsthand through conversations with customers across the country. Losing that incentive adds friction to an upgrade that was already a significant investment.
But here’s our honest perspective: the financial case for an air source heat pump in 2026 was never built on the federal tax credit alone. Heat pumps deliver exceptional long-term energy savings, particularly in moderate and mixed climates. The HEAR program, utility rebates, and state incentive programs continue to offer meaningful savings pathways, especially for income-qualified households. And for the millions of homeowners who installed a qualifying heat pump in 2025, the $2,000 credit is still waiting for you on Form 5695.
What we feel most strongly about is this: whatever incentives you do or don’t have access to, the long-term performance of your heat pump depends on the maintenance decisions you make after it’s installed. A high-efficiency heat pump with a dirty, misrated air filter isn’t performing at the efficiency level that earned it the ENERGY STAR certification. The filter is the first line of defense for your system’s airflow, indoor air quality, and operational lifespan.
You did the right thing by upgrading to a heat pump. Now protect that investment with the same level of care and intention. That means a MERV 8 to MERV 11 rated filter, changed on schedule, in a size that actually fits your system. It’s the highest-return, lowest-cost maintenance step you can take for your HVAC system. And it’s something we’ve been helping over two million American households get right for more than a decade.
The bottom line: Claim your 2025 credit if you qualify. Explore HEAR rebates if you’re upgrading in 2026. And no matter which path you’re on, protect your HVAC investment with the right air filter. Your system’s efficiency, and your family’s air quality, depend on it.
Frequently Asked Questions
Q: Are there still federal tax credits for air source heat pumps in 2026?
A: No. The Section 25C credit expired December 31, 2025.
Heat pumps installed in 2026 or later do not qualify.
Homeowners who installed a qualifying system by December 31, 2025 can still claim up to $2,000 on their 2025 tax return, filed during the 2026 tax season.
Q: How much was the federal heat pump tax credit?
A: The credit covered 30% of qualifying installation costs.
Annual cap for heat pumps: $2,000
Separate cap for other improvements (windows, doors, insulation): $1,200
Maximum combined 25C credits in one tax year: $3,200
Q: What IRS form do I use to claim the heat pump tax credit?
A: IRS Form 5695, Residential Energy Credits, Part II.
Attach it to your 2025 federal tax return.
You must report the manufacturer’s QMID for the heat pump unit.
Full instructions: irs.gov/instructions/i5695
Q: Does my heat pump need to meet specific efficiency standards to qualify?
A: Yes. The unit must meet or exceed the CEE highest efficiency tier (excluding the advanced tier) in effect at the start of the installation year.
For 2025: ENERGY STAR Most Efficient designation was the practical pathway.
Two eligibility routes: cold climate/heating-dominated and cooling-dominated/dual-fuel applications.
Q: Can renters claim the heat pump tax credit?
A: Yes, in most cases.
The renter must have paid for the installation.
The home must be their primary U.S. residence.
Installation must have been completed by December 31, 2025.
Q: Is the Section 25C credit refundable?
A: No. It is non-refundable.
The credit can only reduce your federal income tax liability to zero.
If the credit exceeds what you owe, you do not receive the difference as a refund.
You cannot carry unused credit forward to future tax years.
Q: What MERV rating is best for an air source heat pump?
A: MERV 8 to MERV 11 for most residential systems.
This range captures dust, pollen, pet dander, and particulate matter.
It maintains adequate airflow and keeps static pressure within safe limits for the blower.
MERV 13 or higher can restrict airflow significantly. Confirm your system can handle the increased static pressure. Not recommended for most residential HVAC systems without verification.
Q: What rebates are available for new heat pump installations in 2026?
A: The HEAR program is the primary alternative.
Point-of-sale rebates of up to $8,000 for income-eligible households.
Individual state energy offices administer the program. Availability varies by state.
Additional utility rebates and state-specific programs may also apply.
Check your state energy office and local utility for current offerings.
Ready to Protect Your HVAC Investment?
You’ve done the hard work. Now make sure your heat pump performs at the level it was built for. At Filterbuy, we’re obsessed with one thing: better air for all. After more than a decade of American manufacturing and over two million customers served, we know what makes the difference in your home’s air quality. It starts with the right filter.
Whether you’re upgrading your HVAC system, filing your 2025 tax return, or simply ready to take your indoor air quality seriously, here’s how we can help:
Find your perfect filter: Over 600 American-made air filter sizes, MERV 8, MERV 11, MERV 13, and custom sizes if you need them, delivered directly to your door.
Subscribe and save: Our auto-delivery subscription ensures you never forget a filter change. That’s the maintenance step that keeps your heat pump running at peak efficiency.
Still deciding on a heat pump? Read our expert guide to help you weigh the full financial picture.
Is a Heat Pump Worth It in 2026? — Read the Filterbuy Guide
Shop American-Made Air Filters for Your Heat Pump System
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Shop Filters at Filterbuy.com — Click Here to Find Your Size
Tax Disclaimer: The information on this page is provided for general informational and educational purposes only and does not constitute tax, legal, or financial advice. Tax laws and credit availability are subject to change. Individual eligibility, credit amounts, and filing requirements may vary based on your specific situation. Always consult a qualified tax professional before making decisions based on tax credit eligibility or before filing any tax return.
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