Every homeowner starting a heat pump project in 2026 runs into the same confusion: do you take 25C, HEEHRA, both, or neither? The answer changed dramatically in July 2025, when the One Big Beautiful Bill Act killed the 25C heat pump credit and left HEEHRA as the only live federal rebate — but one that is income-qualified and unevenly rolled out across states.
This guide walks through what each program is today, what it was, and a decision tree you can use in about five minutes to figure out which path applies to you.
What 25C used to be
From 2023 through December 31, 2025, Section 25C of the Internal Revenue Code gave homeowners a federal tax credit of 30% of the cost of a qualifying heat pump, capped at $2,000 per year. Eligibility required CEE Tier 2 (or higher) efficiency ratings for your climate zone. Installation labor counted toward the creditable amount.
A separate $1,200 annual cap covered insulation, windows, doors, and electrical panel upgrades under 25C. Homeowners claimed the credit on IRS Form 5695 with their return for the year the equipment was placed in service. The credit was non-refundable, which meant it could zero out your tax liability but not generate a refund beyond what you had withheld.
25C had no income cap. Any homeowner with federal tax liability could claim it.
What killed 25C
President Trump signed the One Big Beautiful Bill Act (OBBBA) on July 4, 2025. The bill's authors argued the credit disproportionately benefited higher-income households who would have installed heat pumps anyway, and redirected the revenue to deficit reduction. The legislation accelerated the sunset of 25C and 25D (for residential solar and batteries) from their original Inflation Reduction Act schedule.
The repeal was prospective only. Equipment placed in service on or before December 31, 2025 is still creditable on the 2025 tax return (filed by April 15, 2026). Equipment placed in service on or after January 1, 2026 receives zero federal tax benefit under 25C.
The full story on what changed and why is in our explainer on what happened to 25C in July 2025.
What survives: 25D-geothermal, 25D-solar, and a few building envelope items
The OBBBA repeal was targeted, not total. Several adjacent federal credits survive:
Geothermal ground-source heat pumps retain their 30% federal credit through 2032 under Section 25D. This is the only residential heat pump tax credit still active. Air-source units (the vastly more common type) are dead; ground-source units are still creditable.
Residential solar PV and batteries retain the 30% 25D credit, though the sunset schedule was shortened by OBBBA. Solar remains creditable through 2033 on current rules, with a phase-down afterward.
Building envelope items — specific windows, doors, and insulation meeting Energy Star requirements — retain partial creditability through the remaining 25C structure. Heat pumps were carved out; envelope items were not.
If your project includes solar + batteries + a heat pump, you split the federal credits: 25D covers solar and batteries, and HEEHRA covers the heat pump. There is no double-dipping, because they apply to different equipment.
What HEEHRA is today
The Home Electrification and Appliance Rebate Act allocates $4.5 billion to state energy offices, which administer point-of-sale rebates on heat pumps, heat pump water heaters, induction ranges, electrical panels, and wiring. The heat pump rebate caps at $8,000 per household.
HEEHRA is income-qualified. Households under 80% of county AMI receive the full rebate (up to 100% of project cost, capped at $8k for heat pumps). Households at 80–150% AMI receive 50% of project cost, capped at the same $8k ceiling. Households above 150% AMI are ineligible. See our HEEHRA income tiers guide for the AMI calculation mechanics.
HEEHRA is state-administered, and state rollout is uneven. New York, Georgia, New Mexico, California, Hawaii, and Colorado have live portals. Massachusetts, Minnesota, Illinois, New Jersey, Washington, Oregon, Michigan, Pennsylvania, Maryland, Connecticut, and Rhode Island are pending (most launching Q2 to Q3 2026). Maine and Vermont are fully reserved and waitlisting new applications.
The structure is fundamentally different from 25C. 25C was a tax credit you claimed months later. HEEHRA is a point-of-sale rebate your certified contractor applies to the invoice, so you pay the net-of-rebate amount upfront. No tax liability is needed to benefit.
The decision tree
Work through these questions in order. The first "yes" or "no" that routes you out of HEEHRA ends the decision — you don't need to keep going.
1. Is your equipment an air-source heat pump being installed in 2026 or later?
- Yes → 25C is dead for you. Continue.
- No, it's geothermal → You qualify for the 25D 30% credit through 2032. HEEHRA also applies if you're income-qualified and your state is live. Stack both.
2. Is your household AGI under 150% of your county AMI?
- Yes → You are HEEHRA-eligible in principle. Continue.
- No → HEEHRA is not available to you. Your path is utility rebates only. Use the rebate finder to pull your ZIP's utility programs.
3. Is your state's HEEHRA portal live?
- Yes → Apply through a state-certified contractor. They file the rebate on your behalf at the time of installation.
- No, pending → Wait (most states launch Q2 to Q3 2026), or take utility rebates now and skip HEEHRA. Warning: some states disallow HEEHRA on equipment already installed before portal launch.
- No, fully reserved (Maine, Vermont) → HEEHRA unavailable. Utility rebates only.
4. Are you stacking anything else?
- Yes, utility rebate (Mass Save, Xcel, PG&E, etc.) → Stack freely. Utility rebates do not reduce HEEHRA.
- Yes, HOMES rebate → Can only take HEEHRA or HOMES on the same project, not both. HEEHRA is simpler and faster for most single-equipment projects.
- Yes, 25D-solar → No conflict. 25D covers solar/batteries; HEEHRA covers the heat pump.
What the stack actually looks like
A concrete example: a Denver household at 70% of county AMI is doing a $12,000 ducted heat pump retrofit in 2026.
- 25C federal credit: $0 (dead)
- 25D federal credit: $0 (air-source, not geothermal)
- HEEHRA: $8,000 (under 80% AMI, full rebate, Colorado portal live)
- Xcel Energy rebate: $2,200
- State of Colorado ENERGY tax credit: $1,500
Net cost: $300. That is the kind of stack that makes the income qualification step worth an hour of paperwork. The same household in Massachusetts today would only capture the utility portion until the state HEEHRA portal opens — which is why state status matters almost as much as income status.
What 25C claimants in 2025 should still do
If you installed a qualifying heat pump on or before December 31, 2025, 25C still applies to you on your 2025 tax return. The repeal was prospective. Form 5695 is the correct filing mechanism, and the credit is worth up to $2,000 against your 2025 tax liability.
Homeowners who have not yet filed 2025 returns should confirm with their accountant that equipment placed in service before the sunset date is flagged on Form 5695. The common mistake is tax preparers assuming "the credit is gone" and skipping the form entirely. It is gone going forward, not retroactively.
Separately, if you paid for equipment in late 2025 but the installation completed in early 2026, the "placed in service" date — not the contract date — determines eligibility. Equipment in a warehouse on December 31 does not count. Equipment installed and operational on December 31 does. Double-check your installer's paperwork on this point.
What about HOMES rebates?
HOMES (Home Owner Managing Energy Savings) is the second federal rebate program created by the Inflation Reduction Act. It is structurally different from HEEHRA — HOMES pays based on measured or modeled energy savings across the whole home, not on specific equipment. Rebates cap at $8,000 and are state-administered.
HOMES and HEEHRA do not stack on the same project. You pick one. For a single-equipment heat pump swap, HEEHRA is almost always the better choice: simpler documentation, specific equipment paths, and point-of-sale rebate. HOMES is the right choice for whole-home weatherization + heat pump + water heater + envelope projects, where the total modeled savings trigger a bigger rebate than HEEHRA alone would provide.
HOMES rollout lags HEEHRA in most states. Use the rebate finder to see which federal track your state has activated — some states launched HEEHRA first, others are leading with HOMES, and a few are sequencing both.
Where to go next
If you know your state is live and your income is under 150% AMI, start with the HEEHRA guide to confirm equipment eligibility, then pick a certified contractor from your state's list.
If you are unsure whether your state is live or what your stack is worth, use our heat pump calculator — enter your ZIP and it pulls every rebate currently available, ranks them by value, and shows which ones combine. The rebate stacking guide explains the full matrix of what stacks with what. For anyone still looking at pre-2026 installations, the federal 25C status page has the remaining window for 2025 claims.