Category: Heat Pumps

The federal Energy Efficient Home Improvement Credit (Section 25C), which covered 30% of the cost of a qualifying heat pump up to 2,000 USD per year, ended for equipment placed in service after December 31, 2025. The change came from the One Big Beautiful Bill Act signed on July 4, 2025. If your heat pump was installed and running by December 31, 2025, you can still claim the credit on your 2025 federal tax return using IRS Form 5695. For installations in 2026, the federal credit is no longer available, but state, utility and manufacturer incentives may still help.

Quick answers

• Installed and operating by December 31, 2025: you can claim 25C on your 2025 return.
• Installed in 2026: no federal 25C credit.
• The credit was 30% of costs, up to 2,000 USD per year for heat pumps and heat pump water heaters.
• Section 25D (geothermal heat pumps, solar) also ended for property placed in service after 2025.
• Check your state energy office and utility for rebates that may still apply.

What the 25C credit covered

Before it ended, 25C offered:

Category	Credit	Annual cap
Qualifying air-source heat pumps and heat pump water heaters	30% of cost including labor	2,000 USD
Insulation, air sealing, windows, doors, energy audits and other items	30%	1,200 USD combined (with sub-limits)
Combined maximum per year		3,200 USD

Equipment had to meet efficiency requirements, generally tied to the highest efficiency tier set by the Consortium for Energy Efficiency.

How to claim it for a 2025 installation

1. Confirm the system was placed in service (installed and operational) by December 31, 2025.
2. Gather your invoice showing equipment and labor costs, and the manufacturer’s certification statement for the model.
3. Complete IRS Form 5695, Part II, and attach it to your 2025 federal return.
4. Keep records in case the IRS asks.

The credit is non-refundable: it reduces the tax you owe but doesn’t create a refund on its own. Consult a tax professional for your specific situation.

What’s still available in 2026

State programs

Several states have their own heat pump rebates or tax incentives, and some run rebate programs funded under federal energy legislation from 2022. Availability, eligibility and funding vary widely and can run out. Check your state energy office’s website.

Utility rebates

Many electric utilities offer rebates for ENERGY STAR or high-efficiency heat pumps, and some offer special heat pump electricity rates. Search your utility’s website for “heat pump rebate.”

Manufacturer and contractor promotions

Manufacturers often run seasonal rebates, especially in spring and fall. Contractors may offer financing deals. See How to Compare HVAC Quotes.

Does a heat pump still make sense without the credit?

Often yes, especially if you need to replace both an air conditioner and a furnace, don’t have natural gas, or currently heat with electric resistance or propane. The math depends on your energy prices and climate. Run the numbers: Heat Pump vs Furnace: Which Is Cheaper to Run?

Beware of misleading claims

If a salesperson tells you a 2026 installation qualifies for the federal 25C credit, ask for the specific program in writing. Federal 25C does not apply to systems placed in service after 2025.

Frequently asked questions

My heat pump was paid for in 2025 but installed in January 2026. Does it qualify?
The rule is based on when the property is placed in service. A system installed and operating in 2026 generally doesn’t qualify. Confirm with a tax professional.

Can I still claim the credit for insulation or windows installed in 2025?
Yes, if they met the requirements and were placed in service by December 31, 2025.

Does the credit apply to heat pump water heaters?
It did, under the same 2,000 USD annual cap, for units placed in service by the end of 2025.

Related guides

• Tankless vs Tank vs Heat Pump Water Heaters
• Heat Pump Blowing Cold Air in Heat Mode: Causes and Fixes
• Heat Pump vs Furnace: Which Is Cheaper to Run?

This article is general information, not tax advice. Tax rules can change; confirm details with the IRS or a qualified tax professional.

A heat pump is usually cheaper to run than an electric furnace and often competitive with or cheaper than a gas furnace in mild and moderate climates. In very cold areas with cheap natural gas, a gas furnace often still wins on operating cost. The deciding factors are your local price of electricity versus gas and how cold your winters get. Many homes get the best of both with a dual-fuel system.

Quick answers

• Heat pumps move heat instead of making it, delivering about 2–4 units of heat per unit of electricity in typical conditions.
• Efficiency drops as outdoor temperature falls; cold-climate models keep working well below freezing.
• A heat pump also replaces your air conditioner.
• Gas furnaces deliver hotter air and have lower operating cost where gas is cheap.
• Dual fuel = heat pump for mild weather + furnace for the coldest days.

How the two systems heat

• Gas furnace: burns natural gas or propane. A 96% AFUE furnace turns 96% of the fuel’s energy into heat for your home.
• Heat pump: uses a refrigerant cycle to pull heat from outdoor air and move it inside. Its efficiency is expressed as COP (coefficient of performance). A COP of 3 means 3 units of heat for each unit of electricity.

Run the numbers for your home

Convert both to cost per million BTU of delivered heat:

• Gas: (price per therm × 10) ÷ AFUE
• Heat pump: (price per kWh × 293) ÷ COP

Example prices	Gas furnace (96% AFUE)	Heat pump (COP 3.0)	Heat pump (COP 2.0, cold day)
Gas 1.40 USD/therm, power 0.17 USD/kWh	~14.60 USD	~16.60 USD	~24.90 USD
Gas 1.80 USD/therm, power 0.13 USD/kWh	~18.75 USD	~12.70 USD	~19.05 USD
Gas 1.20 USD/therm, power 0.25 USD/kWh	~12.50 USD	~24.40 USD	~36.60 USD

Plug in your own prices from your utility bills. Seasonal average COP for a good modern heat pump in a moderate climate is often around 2.5 to 3.5.

Comfort differences

• Furnace air feels hot at the vents (often 120–140°F supply air).
• Heat pump air is warm but not hot (often 90–110°F), and the system runs longer cycles. Many people find it more even; some miss the blast of hot air.
• Heat pumps defrost periodically in cold, damp weather, which is normal. See Heat Pump Defrost Mode.

Upfront cost

If you need a new AC and a new furnace at the same time, a heat pump can replace both, which narrows the price difference. If your AC is new and only the furnace failed, a new furnace is usually cheaper upfront. Compare: Heat Pump Installation Cost and Furnace Replacement Cost.

Note: the federal 25C tax credit for heat pumps ended for systems placed in service after December 31, 2025. See Heat Pump Tax Credit 2026: What Ended and What Still Exists.

Climate guide

Climate	Typical best choice
Warm (South, Southwest)	Heat pump
Moderate (mid-Atlantic, Southeast, Pacific)	Heat pump or dual fuel
Cold (Midwest, Northeast)	Cold-climate heat pump, dual fuel, or high-efficiency gas furnace
Very cold with cheap gas	Gas furnace or dual fuel
No gas available	Heat pump (instead of electric resistance or propane)

Dual fuel: the hybrid option

A dual-fuel system pairs a heat pump with a gas furnace. The thermostat uses the heat pump until the outdoor temperature drops below a set balance point (often 25–40°F), then switches to gas. It’s a good choice when you want low summer and shoulder-season costs but don’t want to rely on electric backup heat during cold snaps.

Frequently asked questions

Do heat pumps work below freezing?
Yes. Standard models lose capacity in deep cold; cold-climate models are designed to keep heating well below 0°F. Details: Do Heat Pumps Work in Cold Weather?

Is a heat pump more expensive to maintain?
It runs year-round, so it wears faster than an AC alone. Annual maintenance is similar to an AC tune-up.

Can I add a heat pump to my existing furnace?
Often yes, as a dual-fuel setup, if the furnace and ductwork are compatible.

Related guides

• Heat Pump Blowing Cold Air in Heat Mode: Causes and Fixes
• Heat Pump Tax Credit 2026: What Ended and What Still Exists
• How Often Should You Change Your Air Filter?

A heat pump can blow air that feels cool for three normal reasons: its supply air is naturally less hot than a furnace’s, it’s in a defrost cycle, or it’s running in very cold weather. It’s a problem if the air stays cool for long periods, the house can’t reach the set temperature, or ice builds up on the outdoor unit. Common real causes include thermostat settings, a dirty filter, a stuck reversing valve, low refrigerant or failed backup heat.

Quick answers

• Heat pump air at the vents is often 90–110°F, which can feel cool against your hand (your skin is about 93°F).
• Defrost cycles can blow cool air for a few minutes. Normal.
• Check the thermostat is in HEAT (not COOL or FAN ON) and configured for a heat pump.
• Replace the filter and clear snow or debris around the outdoor unit.
• Cold air all the time with the outdoor unit running = call a technician.

Is it really cold, or just “not hot”?

Hold a thermometer at a supply vent after the system runs 10 minutes. If the air is 85°F or more and the house is slowly warming, the system is working. If air is close to room temperature or colder, something’s wrong.

1. Thermostat settings

• Mode should be HEAT.
• Fan should be AUTO. With ON, the blower runs between cycles and air feels cool.
• System type: if a new thermostat is set up for a gas furnace instead of a heat pump, the reversing valve can be energized wrong, so the system cools instead of heats. Check the installer settings or the “O/B” wire setup. See Thermostat Wiring Colors Explained.

2. Defrost mode

In cold, damp weather, frost builds on the outdoor coil. The heat pump temporarily switches to cooling mode to melt it, typically for 5 to 15 minutes. You might see steam outside. Many systems turn on backup heat during defrost so indoor air doesn’t feel cold. Details: Heat Pump Defrost Mode.

3. Very cold outdoor temperatures

As it gets colder, a standard heat pump’s output drops. If the backup heat isn’t working, air temperature falls and the house loses ground. Check whether “AUX” or “AUX HEAT” appears on the thermostat. If it shows but the air stays cool, the backup heat strips or their breaker may have failed.

4. Dirty filter or blocked airflow

A clogged filter reduces airflow and heating capacity. Replace it and open all vents.

5. Outdoor unit blocked by snow, ice or debris

The outdoor coil needs airflow. Clear snow, leaves and ice around it, carefully, without chipping at the coil. If the unit is encased in ice that doesn’t melt, see Heat Pump Frozen in Winter.

6. Stuck reversing valve

The reversing valve switches the system between heating and cooling. If it sticks in cooling position, the heat pump blows cold air in heat mode, and often the outdoor unit blows warm air. This needs a technician to diagnose and repair.

7. Low refrigerant

A leak reduces heating capacity. Signs include longer run times, ice on parts of the outdoor coil that doesn’t clear, and higher bills. Leaks need a professional repair.

8. Failing compressor or outdoor fan

If the outdoor unit hums but doesn’t run, or the fan doesn’t spin, the problem may be a capacitor, contactor, fan motor or compressor. Call a technician.

Quick reference

Symptom	Likely cause
Cool air for a few minutes, steam outside	Normal defrost
Lukewarm air, house warming slowly	Normal heat pump air temperature
Cool air all the time, outdoor unit running	Reversing valve, thermostat setup, low refrigerant
Cool air, outdoor unit silent	Power, capacitor, contactor, thermostat
Fine in mild weather, cold on cold nights	Backup heat not working or system undersized

Frequently asked questions

Why does my heat pump blow cold air at the start of a cycle?
Until the coil warms up, the first air can feel cool. It should warm within a minute or two.

Should I switch to emergency heat if it blows cold air?
Only if the heat pump itself has failed and you need heat until a technician arrives. Emergency heat costs much more to run.

Can a heat pump heat in 20°F weather?
Yes. Most can, and cold-climate models can heat effectively at much lower temperatures.

Related guides

• Heat Pump vs Furnace
• Heat Pump Tax Credit 2026: What Ended and What Still Exists
• How Often Should You Change Your Air Filter?