There are two separate federal tax credits for different types of heat pumps:

• 25C tax incentive: 30% (max $2,000) for air source and hydronic heat pumps
• 25D tax incentive: 30% (uncapped) for geothermal heat pumps

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Air source and hydronic heat pumps

To qualify for the 25C tax credit, the heat pump you install must meet the following requirements:

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If you live in a cold climate and choose to install a heat pump designed specifically for cold climates, it must meet the following requirements:

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Geothermal heat pumps

To qualify for the 25D tax credit, the heat pump you install must meet the following requirements:

• It must use the ground or ground water as a thermal energy source (to heat) or as a  thermal energy sink (to cool) a home
• It must be ENERGY STAR certified

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Definitions

ENERGY STAR certification: ENERGY STAR® is the government-backed symbol for energy efficiency, providing simple, credible, and unbiased information that consumers and businesses rely on to make well-informed decisions.

SEER2 rating: SEER stands for Seasonal Energy Efficiency Ratio. The higher the SEER rating, the more energy efficient the equipment is. 

EER2 rating: EER stands for Energy Efficiency Ratio. The higher the EER rating, the more energy efficient the equipment is.

HSPF rating: HSPF stands for Heating Seasonal Performance Factor. It rates the efficient operation of the heating portion of the heat pump. As the HSPF increases, the unit functions at a more efficient level.