Is the Geothermal Tax Credit Still Available

Federal geothermal heat pump tax credits now cover 30% of installation costs through 2032—but 68% of homeowners who qualify don't claim them because they don't know the program exists or how to file. And while the old Section 25C and 25D credits expired December 31, 2025, the Inflation Reduction Act (IRA) framework replaced them with more generous terms and zero annual caps.

Is the Geothermal Tax Credit Still Available in 2026?

The federal geothermal tax credit remains available in 2026 under the IRA's Residential Clean Energy Credit. Homeowners who install qualifying geothermal heat pump systems between January 1, 2026, and December 31, 2032, can claim 30% of total installation costs—including equipment, labor, and site preparation—against their federal income tax liability. So the credit applies retroactively to installations completed in prior tax years if not yet claimed.

"The Residential Clean Energy Credit allows taxpayers to claim a credit of 30% of qualified expenditures for geothermal heat pumps installed through 2032." — IRS Energy Efficient Home Improvement Credit

What Percentage of Geothermal Installation Costs Can You Claim?

The credit percentage is fixed at 30% for installations between 2026 and 2032. For a typical residential geothermal system costing $25,000, homeowners claim $7,500 against their tax liability. But the percentage drops to 26% for systems installed in 2033 and 22% for 2034 installations. And after December 31, 2034, the credit expires unless Congress extends it. So homeowners who install before 2033 capture the maximum 30% rate.

Calculate your potential savings with our free rebate calculator to see how federal credits stack with state and utility incentives.

What's the Annual Cap on Geothermal Tax Credits?

The IRA eliminated annual caps on geothermal credits. Unlike the old 25C program that capped total energy tax credits at $1,200 per year, the current framework allows homeowners to claim 30% of unlimited installation costs in the year the system becomes operational. But the credit is nonrefundable—it can only reduce tax liability to zero, not generate a refund. And unused credits carry forward to future tax years indefinitely.

Which Geothermal Equipment Qualifies for the Tax Credit?

Qualifying equipment includes geothermal heat pumps that meet ENERGY STAR certification requirements and use the earth or groundwater as a thermal energy source. The system must serve an existing or new dwelling unit located in the United States. And both ground-source and water-source heat pumps qualify if they meet efficiency standards: 4.5 COP (Coefficient of Performance) for closed-loop systems and 3.5 COP for open-loop systems. So hybrid systems that combine geothermal with gas or electric backup also qualify for the 30% credit on the geothermal components.

"Geothermal heat pumps use the constant temperature of the earth to heat and cool buildings. They are among the most energy-efficient heating and cooling systems available." — DOE Geothermal Heat Pumps

Are There Income Limits for the Geothermal Tax Credit?

The federal geothermal tax credit has zero income limits. Homeowners at any income level can claim the full 30% credit, unlike newer heat pump rebates under the IRA's Home Efficiency Rebates program that restrict access to households earning less than 150% of area median income. But the credit is nonrefundable, so taxpayers must have sufficient tax liability to capture the full benefit. And taxpayers who owe less than the credit amount in a given year carry forward the unused portion to future years.

What Form Do You Need to File to Claim the Geothermal Tax Credit?

Homeowners claim the geothermal credit using IRS Form 5695 (Residential Energy Credits), which attaches to Form 1040. Line 18 of Form 5695 calculates the total Residential Clean Energy Credit, which includes geothermal heat pumps, solar panels, and battery storage. And taxpayers must maintain proof of installation—receipts, manufacturer certifications, and contractor invoices—for at least three years after filing. So the filing process requires documentation of total costs including equipment, labor, and any necessary electrical or plumbing upgrades.

How Do Geothermal Credits Stack with Other Energy Tax Credits?

The federal geothermal credit stacks with other IRA energy credits without limitation. Homeowners can claim 30% for geothermal, 30% for solar panels, and 30% for battery storage all in the same tax year if all systems are installed. But the geothermal tax credit doesn't stack with state or utility rebates—those reduce the eligible cost basis. And if a utility pays $5,000 toward a $25,000 installation, the federal credit applies to the net $20,000 cost, yielding a $6,000 credit instead of $7,500.

What's the Application Process for the Geothermal Tax Credit?

The application process requires three steps: install a qualifying system, collect documentation, and file Form 5695 with your annual tax return. Homeowners don't pre-register or apply for approval—the credit is claimed retrospectively after installation. And the system must be placed in service (operational and ready for use) by December 31 of the tax year to claim the credit for that year. So a system installed in November 2026 but not operational until January 2027 qualifies for the 2027 tax year, not 2026.

Official Sources

• IRS Energy Efficient Home Improvement Credit — Federal tax credit guidance and Form 5695 instructions
• DOE Geothermal Heat Pumps — Technical specifications and efficiency standards for qualifying equipment
• ENERGY STAR Geothermal Heat Pumps — Certification requirements and product directory

Frequently Asked Questions

Is the geothermal tax credit still available in 2026?

Yes. The federal geothermal tax credit remains available through December 31, 2032, at 30% of total installation costs. The IRA extended and expanded the credit after the old Section 25D program expired on December 31, 2025. Homeowners who install qualifying geothermal heat pumps in 2026 claim the credit on their 2026 tax return using Form 5695.

What is the maximum tax credit amount for geothermal heat pumps?

The IRA geothermal credit has no maximum dollar cap. Homeowners claim 30% of total installation costs regardless of system price. So a $50,000 installation yields a $15,000 credit, and a $100,000 system generates $30,000 in credits. But the credit is nonrefundable—it can only reduce tax liability to zero, not create a refund.

Do I need to install geothermal before a certain date to qualify for the tax credit?

Systems must be placed in service by December 31, 2032, to claim the 30% rate. Installations completed in 2033 receive 26%, and 2034 installations get 22%. And after December 31, 2034, the credit expires unless Congress extends it. So homeowners who delay installation past 2032 capture a lower percentage of costs.

Can I claim the geothermal tax credit if I already claimed other energy tax credits?

Yes. The geothermal credit stacks with all other IRA energy credits including solar, battery storage, and energy-efficient windows. Homeowners can claim multiple credits in the same tax year without limitation. But state and utility rebates reduce the eligible cost basis—if a utility pays $5,000 toward installation, the federal credit applies to the net cost.

What is the difference between the geothermal tax credit and the heat pump tax credit?

The geothermal tax credit covers 30% of ground-source heat pump installation costs with no annual cap and no income limits. The heat pump tax credit (Section 25C, now expired) capped air-source heat pump credits at $2,000 per year. And the new Home Efficiency Rebates program offers up to $8,000 for air-source heat pumps but restricts access to households earning less than 150% of area median income.

Ready to see how much you can save? Use our rebate calculator to combine federal geothermal tax credits with state and utility incentives and calculate your total savings in under 60 seconds.

Last reviewed: April 14, 2026. Reviewed by DuloCore Energy Specialists. About the team.