Geothermal Heat Pump Rebates by State (2026)

The federal residential geothermal tax credit under IRC §25D was terminated for new installs placed in service after December 31, 2025 by the One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025). For 2026 buyers, the savings picture is now built from state tax credits, utility rebates, the federal HEAR (HEEHRA) and HOMES Act rebate programs administered by state energy offices, and — for new construction or whole-home retrofits — the §48 commercial Investment Tax Credit accessed via third-party ownership leasing. This guide walks through every active program by state and which incentives can stack.

Federal Residential Credit (§25D) — Status for 2026

Under the Inflation Reduction Act of 2022, IRC Section 25D authorized a 30% Residential Clean Energy Credit for qualified geothermal heat pump property placed in service through December 31, 2032, with step-downs in 2033 and 2034. The One Big Beautiful Bill Act (OBBBA, P.L. 119-21) signed July 4, 2025 nullified that schedule and terminated §25D for residential geothermal expenditures made after December 31, 2025. Per IRS interpretation, "expenditure made" is tied to when the system is placed in service (installation completed) — not contract signing or deposit date.

What This Means in Practice

• System placed in service on or before December 31, 2025 — eligible for the 30% federal credit. Claim on IRS Form 5695. Unused credit can carry forward to future tax years.
• System placed in service January 1, 2026 or later — not eligible for §25D. The credit no longer applies to new residential installs.
• Existing 2025 carryforward — homeowners who installed before the cutoff and could not use the full credit in tax year 2025 can still carry forward unused amounts on subsequent returns.

Statutory citation: P.L. 119-21 (One Big Beautiful Bill Act, Title VII, §70511). IRS guidance: Residential Clean Energy Credit overview at irs.gov.

Federal Commercial Credit (§48) and Third-Party Ownership

While §25D ended, the commercial Section 48 Investment Tax Credit for geothermal heat pump systems remains active. The base rate is 6%, increasing to 30% when the project meets prevailing-wage and apprenticeship requirements, with additional bonuses for domestic-content sourcing or energy-community siting. The §48 phase-down for geothermal heat pumps is 30% through 2032, 5.2% in 2033, 4.4% in 2034, then 0% after December 31, 2034. Wind and solar were phased out faster under OBBBA, but geothermal was explicitly preserved.

Third-Party Ownership (TPO) Leasing for Homeowners

A growing 2026 pathway: a corporate lessor (the geothermal installer or a financing partner) owns the equipment, claims the §48 commercial ITC, and passes the savings to the homeowner through a reduced monthly lease or power purchase agreement. The homeowner does not own the equipment but pays a lower monthly cost than a financed purchase. TPO is not a tax credit you claim — it is a financing structure that captures the §48 benefit on your behalf. Ask any installer quoting a 2026 install whether they offer a lease or PPA option backed by the §48 credit.

Statutory citation: 26 U.S.C. §48 at Cornell Law. Treasury energy-community and prevailing-wage guidance is maintained at energy.gov/lpo.

HEAR (HEEHRA) §50122 — Income-Tiered Point-of-Sale Rebate

The High-Efficiency Electric Home Rebate Program (HEAR), formerly drafted as HEEHRA and codified at IRA §50122, is a federal rebate program administered by state energy offices. It provides a point-of-sale discount for qualified electrification equipment, including ground source heat pumps. Funding flowed to states through the U.S. Department of Energy; rollout dates and program rules vary by state.

HEAR Rebate Levels for Heat Pumps (Including GSHP)

HEAR also provides separate rebate caps for electrical panel upgrades ($4,000), wiring ($2,500), and other electrification equipment. Total HEAR rebates per household are capped at $14,000.

HOMES §50121 — Performance-Based Whole-Home Rebate

The HOMES Rebate Program, codified at IRA §50121, is a separate program from HEAR. HEAR and HOMES are two different programs — they are not synonyms, despite frequent conflation in older guides.

HOMES pays a rebate based on modeled or measured whole-home energy savings achieved through a retrofit. Rebate amounts depend on the percentage of energy reduction the project delivers and on household income. Lower-income households receive higher rebates per kWh saved. Like HEAR, HOMES funding is administered through state energy offices on a state-by-state rollout.

HEAR vs. HOMES — How They Stack

HEAR and HOMES cannot be used to pay for the same piece of equipment in the same project. However, they can stack within a single home renovation if applied to different scopes of work — for example, HEAR for the heat pump itself and HOMES for the broader envelope and weatherization improvements that improve whole-home performance.

State Rollout Status

States are implementing both programs at different speeds. Use the DOE program tracker at energy.gov/scep/home-energy-rebates-programs to verify when your state opens its HEAR or HOMES portal. Some states are only accepting contractor enrollments; others have launched homeowner applications.

State-by-State Rebate and Tax Credit Programs

The table below covers active state and major utility rebate programs for ground source heat pumps as of 2026. Programs change frequently — verify current amounts and eligibility directly with the program administrator before signing any installation contract.

Don't see your state? Use the DSIRE database (dsireusa.org), maintained by NC State University with U.S. DOE funding, to search every state, utility, and local incentive currently active.

Stacking Example — 2026 New York Homeowner

The example below shows what a 2026 install looks like under the new federal landscape: no §25D, but state and utility programs still active. The homeowner is replacing an aging oil furnace with a $25,000 GSHP system and is over the HEAR income threshold.

Total reduction: 57% off retail. A 2025 install of the same system would have added a $7,500 federal §25D credit on top, bringing the net to $3,250 — but that pathway is closed for 2026 placements.

2026 Realistic Payback — With and Without Stacking

Energy savings from a GSHP depend on the displaced fuel and climate zone. Per DOE/EERE and EPA published ranges, GSHPs deliver 30–70% reductions in heating costs and 20–50% reductions in cooling costs versus conventional systems. Homeowners replacing oil heat or electric resistance see the highest savings; replacing a modern 97% AFUE gas furnace yields the smallest delta.

Property Tax Exemptions for Geothermal Systems

Adding $20,000–$30,000 of installed geothermal equipment can raise a home's assessed value, which raises annual property tax. Many states exempt geothermal and other renewable energy systems from this reassessment, partially or fully. Exemption value depends on home value and local mill rate but commonly saves $100–$400 per year, or $1,500–$6,000 over the system's lifetime.

States with full or partial property tax exemptions or assessment offsets for geothermal heat pump systems include:

• Arizona — solar and renewable energy systems exempt from added assessed value
• Colorado — residential renewable energy systems exempt from property assessment increase
• Iowa — geothermal heating and cooling systems fully exempt
• Maryland — county-level credits against property tax for geothermal systems; varies by jurisdiction
• Massachusetts — renewable energy personal property exemption available
• Minnesota — solar and geothermal systems classified as personal (not real) property for tax purposes
• Montana — renewable energy systems exempt from property tax for 10 years
• New York — residential solar, wind, and geothermal systems exempt from real property tax increases for 15 years
• North Dakota — renewable energy improvements exempt for 5 years
• Ohio — qualified energy projects may qualify for property tax exemptions (case-by-case)
• Virginia — localities may provide partial exemption; verify with county assessor
• Wisconsin — solar and geothermal systems exempt from property tax assessment

Indiana note: the previously listed Indiana property tax deduction for geothermal (IC 6-1.1-12-34) was repealed by SEA 1 (2025), effective for assessment dates on or after January 1, 2025. It is no longer an active incentive. Confirm any state's exemption directly with the county assessor's office before relying on it in your savings model.

Sales Tax Exemptions and Other State-Level Levers

• Virginia — sales tax exemption available for certain renewable energy equipment (verify current rule).
• Washington — sales and use tax exemption applicable to certain heat pump installations (verify current rule).
• Maryland — Maryland Energy Storage Tax Credit; not GSHP-specific but stackable with separate utility rebates.

How to Find the Utility Rebate You Qualify For

1. Open your utility's website. Look for "Energy Efficiency," "Rebates," or "Programs" in the main nav or footer.
2. Search "geothermal" or "ground source heat pump." Some utilities file these under "heating & cooling" rather than as a standalone program.
3. Call directly. Tell them you are installing a ground source heat pump and ask which programs are currently funded. Funding is typically allocated annually and can run out mid-year.
4. Ask your contractor. Experienced GSHP installers know which utility rebates apply in their service area and typically handle the paperwork on your behalf.

DSIRE — The Single Best Database

The Database of State Incentives for Renewables and Efficiency, hosted at dsireusa.org by NC State University with U.S. DOE funding, lists every state, utility, and local incentive currently active. Filter your state and select "geothermal heat pump" or "ground source heat pump" to see active programs.

Timing Matters

Many utility rebate programs are first-come, first-served and exhaust funding mid-year. If you are planning a 2026 install, confirm program availability before locking in your install date. Waiting from spring to fall could mean missing a rebate that depleted earlier in the year.

2026 Federal Financing Alternatives

With §25D no longer available for new residential installs, federal financing programs have become the primary federal-level tool for offsetting upfront cost.

• Fannie Mae HomeStyle Refresh (SFC 892) — effective March 31, 2026, this rebrand of HomeStyle Energy expanded scope to include cosmetic, energy, resiliency, and environmental remediation improvements up to 15% of the home's future value. It is the modern primary GSE financing path post-§25D.
• Freddie Mac GreenCHOICE Mortgage — active alternative for energy-efficient improvements financed into a purchase or refinance.
• USDA REAP Loans — still available for eligible rural projects. REAP grants, however, were paused by Executive Order 14315 and the April 15, 2026 rescission notice (Federal Register 2026-07332). Confirm current status before counting on REAP grant funding.

The FHA PowerSaver pilot, occasionally listed in older guides, ended in 2015 and was archived by HUD under 85 FR 69640 (November 3, 2020). It is not an active 2026 program.

Frequently Asked Questions

What to Do Next

Federal incentives shifted in 2026, but state-level and utility-level pathways remain the largest savings opportunity for most homeowners. The fastest way to know your real out-of-pocket cost is to (1) identify every state, utility, and HEAR/HOMES program you qualify for, and (2) get a quote from a contractor familiar with your local programs.

• Find a certified installer who knows your state's incentives — quotes from contractors registered with your state and utility programs.
• Search DSIRE for your zip code — the most comprehensive single source for active U.S. incentive data.
• Track HEAR / HOMES rollout in your state — DOE State Energy Programs page.