According to U.S. Census data that we analyzed for the counties of Ulster, Greene and Columbia Counties, Hudson Valley homeowners have been moving off of fuel oil and switching to either natural gas, electricity or propane for heating.
There are a variety of tax credits and programs that help defray the cost to these cleaner alternatives. But as we write this in late 2025, there is a sense of urgency around ductless mini-split heat pumps. A key federal tax incentive is going away, and we’re going to break down how you can lock it in before the end of the year.
Federal Heat Pump Tax Credit (IRA) – Up to $2,000 Back
The Inflation Reduction Act created an Energy Efficient Home Improvement Credit for homeowners who installed heat pumps. Homeowners could get 30% of the project cost back as a tax credit of up to $2,000 a year. Therefore, if your project cost more than $10,000, you’d get $2,000 back on your taxes as long as the heat pump meets efficiency requirements.
However, that tax credit was recently repealed by the Big Beautiful Bill that passed. It expires for projects completed after December 31, 2025.
If you’re planning on getting heat pumps, you should try to get them installed by the end of 2025.
How to Claim the Incentive
After your install, save your invoice and equipment info. Come tax time, fill out the IRS form for the Energy Efficient Home Improvement Credit (or give documentation to your tax preparer). It’s a simple form, but if you have questions, consult a tax professional.
What Other Heat Pump Incentives Still Exist?
Even if you miss the end of 2025 deadline, there are other programs and incentives for installing heat pumps.
New York State runs a Clean Heat Program that is administered by NYSERDA and run in partnership with all of the major utility companies. The incentives are usually calculated by system size and capacity. For example, Central Hudson’s Clean Heat program provides up to $1,000 per 10,000 BTU/hour of heating capacity if you fully replace your oil or gas system, and lesser amounts of either $700 or $500 per BtuH if you keep your backup system.
As your contractor, we’d take care of the rebate paperwork for you. Typically, the rebate comes as a check after your installation. It may end up saving thousands of dollars.
Although there are no plans to get rid of this rebate, policies can always change.
A: The federal government offers a 30% tax credit (capped at $2,000) for installing an efficient heat pump. Any homeowner who installs a qualifying heat pump in their primary residence in the U.S. can claim it – there are no income limits. The heat pump must meet certain efficiency standards (generally satisfied by ENERGY STAR certified models). Renters or landlords cannot claim this (unless the landlord also lives in the home part-time). Claim the credit on your tax return for the year you install the system.
A: You’ll use IRS Form 5695 (Residential Energy Credits) when filing your taxes. Enter the total cost of your heat pump project, and the form will calculate 30% of that cost (up to $2,000) as your credit. You then enter that credit amount on your 1040 form to reduce your tax owed (or increase your refund). Keep documentation like invoices and manufacturer certification statements with your tax records. If you use a tax preparer, just give them the heat pump receipt and let them know you want to claim the Energy Efficient Home Improvement Credit.
NYSERDA’s heat pump rebates are upfront discounts provided through the New York State Clean Heat program. Essentially, New York State (via NYSERDA and your utility company) will give you money back for installing a high-efficiency heat pump. The rebate amount depends on your system size and type: for example, an air-source heat pump might get about $500–$1,000 per 10,000 BTUs of capacity.
Q: Can I get both the federal tax credit and New York rebates?
A: Yes! These incentives can be combined. The NYSERDA/utility rebate comes either as a discount on your invoice or a rebate check shortly after installation, reducing your upfront cost. The federal tax credit is then claimed on your tax return – it’s completely separate from the utility rebate. In fact, most homeowners do utilize both: the rebate makes the project affordable to start, and the tax credit gives you a nice bonus later. Just be aware that the tax credit is based on your out-of-pocket expenses.
A: The federal heat pump tax credit is slated to run through the end of 2025 (installations must be completed by Dec 31, 2025 to qualify under current law).
A: No, you do not need to itemize deductions to claim this credit. Tax credits are claimed separately from the standard or itemized deductions. Whether you take the standard deduction or itemize has no effect on your ability to claim the energy credit. You’ll claim it in the “credits” section of your tax return. Just ensure you have a tax liability to benefit from it (since it’s non-refundable, meaning it can zero out your tax bill but won’t give you a negative tax owed). Most working homeowners will have enough tax liability to use a $2,000 credit fully.
