Federal Heat Pump Tax Credit 2025: What Qualifies and How to Claim

Eligibility at a Glance: Property, People, Timing

The credit applies to existing U.S. homes primary or secondary residences. Homeowners and renters can qualify if they pay for the improvement; landlords typically can’t claim credits on rental properties they don’t occupy. There’s no income limit, but the credit is non-refundable it can only offset up to your federal income tax liability for the year of installation. To claim for 2025, the heat pump must be purchased and installed by December 31, 2025 (ordered but not installed doesn’t count). If you’re coordinating multiple upgrades (insulation, windows, electrical), remember the annual cap is $3,200 total. For sizing and scope planning, start with a quick load and equipment review: see our Sizing Guide and Design Center to align equipment capacity, electrical, and airflow with code-driven best practices.

What Equipment Qualifies in 2025 (ENERGY STAR® Most Efficient)

Beginning January 1, 2025, qualifying air-source heat pumps must be listed as ENERGY STAR Most Efficient. There are two compliance paths (select the path that matches your climate and product ratings):

Cold Climate (Path A)

• SEER2 ≥ 16.0 | EER2 ≥ 9.8 | HSPF2 ≥ 8.5

• COP at 5°F ≥ 1.75

• 5°F capacity ≥ 70% of the 47°F capacity

Non-Cold Climate (Path B)

• SEER2 ≥ 16.0 | EER2 ≥ 11.0 | HSPF2 ≥ 8.0

• COP at 5°F ≥ 1.75

• 5°F capacity ≥ 45% of the 47°F capacity

Field note: The low-ambient capacity and COP @ 5°F requirement catch many systems—verify the AHRI/ENERGY STAR listing before purchase. For product discovery, browse Packaged Heat Pumps.

Cold-Climate vs. Non-Cold-Climate: Picking the Right Path

If your design day frequently dips below +5°F, prioritize Cold Climate (Path A) models with verified low-ambient capacity. That 70% capacity retention at 5°F stabilizes supply-air temps and protects comfort during polar snaps. In milder zones, Path B opens more options while still requiring COP 1.75 at 5°F a strong indicator of compressor and control sophistication.

Advanced tip: Plot the unit’s capacity vs. temperature curve and set a balance point that aligns with your envelope and duct performance. If legacy ductwork is borderline, factor in external static pressure and consider Air Handlers optimized for high-MERV filtration. 

Covered System Types (and Where to Find Them)

Heat pump water heaters (HPWH): must have ENERGY STAR and UEF ≥ 3.3 (credit up to $2,000).

Side note: For line set replacements and accessories, see Accessories to ensure the whole scope is captured in your cost basis.

How the Money Works: 30% Calculation + Caps

Your credit is 30% of total installed cost (equipment + labor + necessary materials) after subtracting utility rebates or other discounts, subject to annual limits.

• Heat pumps & HPWH: up to $2,000 combined

• All other eligible improvements: up to $1,200

• Total annual cap: $3,200

Quick example:

• Installed cost: $11,000

• Utility rebate: $1,000 → Adjusted cost: $10,000

• 30% of $10,000 =$3,000, but heat pump max is $2,000 → Credit = $2,000

If planning envelope upgrades too, sequence work (insulation, air-sealing) the same year to use the additional $1,200 bucket—without compromising your $2,000 for the heat pump. For financing and timing, visit HVAC Financing.

New for 2025: Product Identification Numbers (PINs)

For 2025 installations, equipment must come from an IRS-Qualified Manufacturer (QM). Each qualifying product has a Product Identification Number (PIN). Include the PIN (or 2025-only 4-character QM Code) with your tax filing:

• Split heat pumps: the outdoor unit carries the PIN.

• HPWH: full PIN required.

• Insulation & home energy audits: no PIN.

Field workflow:

1. Confirm the manufacturer is QM-registered.

2. Capture the PIN from the label or spec sheet at commissioning.

3. Store it with your invoice and ENERGY STAR certification.

For 2026 and beyond, the full 17-character PIN is mandatory—no code shortcut. We recommend attaching a commissioning photo of the nameplate to the job packet. Use our Help Center for documentation checklists.

Documentation & Filing: What the IRS Wants to See

Keep a clean paper trail—think inspection-ready:

• Purchase receipts (equipment, materials) and contractor invoices (labor, electrical, crane/rigging, disposal).

• ENERGY STAR Most Efficient proof (manufacturer literature or listing).

• Manufacturer PIN/QM Code as required.

• Permits and commissioning forms (useful if audited).

Filing steps:

1. Complete IRS Form 5695 (Residential Energy Credits) for tax year 2025.

2. Enter the PIN/QM Code for the heat pump/HPWH.

3. Attach totals to your 1040.

4. Retain all docs in your records (audits happen).

If you need a fast, accurate scope summary for your tax preparer, we can package your SKU list, labor detail, and PINs—start with Quote by Photo or contact us via Help Center.

Scheduling, Permits, and Deadlines (Beat December 31, 2025)

The installation must be complete by 12/31/2025 to claim the 2025 credit. Work backward:

• Permits & AHJ lead times: 2–6 weeks typical.

• Utility rebate pre-approval: sometimes required before purchase.

• Electrical upgrades (subpanel, circuits): coordinate early.

• Equipment availability: popular Cold Climate models can sell out in Q4.

Visual timeline (typical):

Week 0–1  Load calc & equipment selection

Week 1–3  Permit & rebate pre-approval

Week 3–5  Install & commissioning

Week 5–6  Final inspection; docs packet

For custom ductless layouts with minimal drywall impact, explore Concealed Duct.

Design for Compliance and Performance (Pro Tips from the Field)

• Manual J/S/D discipline: undersized ducts will crush efficiency and noise. Size for the ESP of the chosen air handler (check blower tables).

• Low-ambient strategy: confirm defrost logic, crankcase heat, and pan heat (where applicable) to protect capacity at 5°F.

• Set the balance point smartly with utility rates in mind; pair with dual-fuel when resilience or TOU rates justify it see Dual-Fuel Packaged Units.

• Refrigerant line hygiene: replace aged lines if diameter or oil compatibility is wrong see Line Sets.

• Commissioning: verify super heat subcool, charge by weight + fine-tune, and static pressure with all filters in place.
  Small steps here protect your COP at 5°F and ensure the system truly matches the Most Efficient performance the tax credit assumes.

Heat Pump Water Heaters (HPWH): Don’t Miss the $2,000

HPWHs qualify for up to $2,000 when ENERGY STAR listed with UEF ≥ 3.3. If you’re upgrading space conditioning and DHW the same year, remember the $2,000 shared cap for heat pumps + HPWH; sequence the spend to maximize value within the $3,200 total annual limit.

Installation notes:

• Provide make-up air and route condensate to a drain.

• In small mechanical rooms, consider ducting kits to reject cool, dehumidified air where it helps (e.g., to a garage).

• Electrical: verify breaker size and circuit availability; HPWHs are friendlier than resistance tanks but still need proper planning.

Working on a broader efficiency package? Coordinate with insulation/air-sealing (covered under the separate $1,200 bucket) and capture everything on one, well-documented invoice for Form 5695.

11) Three Worked Examples (Numbers You Can Copy)

A) Ductless retrofit (mild climate, Path B)

• Scope: 2-zone mini-split + new Line Sets.

• Installed cost: $8,500; utility rebate: $500 → Adjusted: $8,000.

• 30% = $2,400 → Credit capped at $2,000.

B) Cold-climate central (Path A) + insulation

• Heat pump: $10,000; insulation: $3,000; rebates: $1,000 total → Adjusted: $12,000.

• 30% = $3,600 → Heat pump hits $2,000 cap; insulation draws from $1,200 bucket → Annual total: $3,200 (maxed).

C) HPWH only

• Installed cost: $3,200; no rebates.

• 30% = $960 → Credit = $960 (under the $2,000 HPWH cap).

Reminder: If your tax liability is lower than the computed credit, you can only claim up to your tax owed for the year (credit is non-refundable).

Have questions about model numbers vs. AHRI listings? Our Design Center can verify matchups before you buy.