2025 at-a-glance: what changed and why it matters
Two federal levers drive most savings: 25C Energy Efficient Home Improvement Credit and the DOE Home Energy Rebates (HEAR, formerly HEEHRA). For 25C, you can claim 30% of project cost up to $2,000 for a qualifying heat pump; the credit itself remains available for improvements made through 2032. The key 2025 twist is equipment eligibility only ENERGY STAR Most Efficient air-source models qualify beginning this year. Spec your system accordingly to preserve tax credit eligibility.
Rebates under HEAR/HEEHRA are income-qualified and administered at the state level; many are first-come-first-served and can fully reserve early (e.g., parts of California paused single-family intake in 2025). Plan your sequence and reservation timing before ordering equipment. Internal resources: Financing overview.
Federal tax credits (25C): how to qualify and calculate
What you can claim: 30% of qualifying project costs up to $2,000 for a high-efficiency heat pump that meets 2025’s ENERGY STAR Most Efficient criteria. Keep manufacturer certification and invoices for IRS Form 5695. The 25C framework applies to improvements made 2023–2032, but equipment eligibility tightens in 2025, so verify the exact model’s status before you bid.
Pro detail (calculation base): If you also get rebates, subtract utility/public subsidies from the project amount before computing the 25C credit (you can’t take a credit on subsidized dollars). Build your estimate with a clean worksheet to avoid over-claiming.
For cold-climate homes, look for products explicitly labeled “ENERGY STAR Cold Climate” under the Most Efficient umbrella to preserve the credit and comfort at design temps. (Energy Star)
Product discovery: Explore R-32 heat pump systems.
Income-based federal rebates (HEAR/HEEHRA): up to $8,000 for ASHPs
Eligibility bands:
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Low-income (<80% AMI): up to 100% of costs covered, capped at $8,000 for space-heating/cooling heat pumps.
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Moderate-income (80–150% AMI): up to 50% of costs, also capped at $8,000.
States administer program rules, availability, and portals; California’s single-family budget in 2025 saw rapid reservations, with pauses for some regions and categories—proof that timing matters. Stack with 25C where allowed; don’t combine HEAR with HOMES on the same measure.
Internal next step: If you’re not sure where your client will land, send them to our Help Center and we’ll walk through income verification prep.
On-bill repayment (OBR): zero-interest utility programs you can spec today
Holy Cross Energy (CO): OBR at 0% interest up to $15,000, 10-year term, repayments on the electric bill. Their own example pencils out to ~$125/month for the max loan ideal for replacing gas heat with an electric heat pump in mountain climates.
Oregon Energy Trust + Avista/PSCCU: On-Bill Loan Repayment options with expanded 2025 limits; repayments are added to the Avista bill. Trade-ally advances reduce contractor float; homeowners see predictable bill-line repayment. (Energy Trust Insider, myavista.com)
Vermont: While not strictly OBR, Efficiency Vermont offers 0% loans for low-/moderate-income customers up to $25,000 with up to 15-year terms—useful where on-bill isn’t available.
Internal links: Quote options via Quote by Photo.
Low-interest loans: state programs with predictable payments
Efficiency Maine Green Bank: 0% APR (1-yr), 5.99% (5-yr), 7.99% (10-yr); income-based 5.99% (10-yr) option. Loan sizes up to $25,000 and explicitly covers heat pump projects; pair with Maine rebates for stacked savings.
Alaska Heat Smart + Credit Unions: Loans as low as 4.00% APR, typical caps $12,500–$15,000 over 60 months through True North FCU/Tongass FCU. Target this where delivered-fuel costs are high and electrification yields strong OPEX reductions.
Explore equipment: Air handlers.
Utility-backed loans in TVA territory (EnergyRight)
Co-ops and municipal utilities across the TVA EnergyRight service area offer heat pump financing that’s integrated with the power bill. Example: Powell Valley Electric Cooperative lists 8% APR, terms up to 120 months, $2,500–$20,000 amounts, no prepayment penalty, and payments rolled into the monthly bill.
For partial electrification in older homes, consider dual-fuel packages and leverage residential packaged units where ductwork and pad constraints demand compact footprints.
Green mortgages: finance upgrades inside (or alongside) a home loan
FHA Energy Efficient Mortgage (EEM): Lets borrowers wrap cost-effective energy upgrades (like a heat pump) into purchase or refi without separately qualifying for the improvement dollars; underwriting can consider utility savings. Great for whole-home projects where envelope work is happening anyway.
UK reference (for multifamily investors and expats): Nationwide Building Society offers 0% Green Additional Borrowing £5,000–£20,000 at 0% for the first 2 or 5 years—explicitly covering air-source heat pumps and other upgrades. (UK only, but a useful benchmark for portfolio owners.) (Nationwide)
C-PACE for commercial & multi-unit: GSHP and long horizons
For commercial properties (including multifamily, hotels, mixed-use), C-PACE provides long-term, fixed-rate, non-recourse funding repaid via the property tax bill 20–30-year terms are common.
Ready to compare cold-climate heat pumps that qualify for 2025 credits? Explore top-rated systems at The Furnace Outlet
