FEDERAL RESIDENTIAL CLEAN ENERGY CREDIT (25D)
* EXPIRED *
Federal 25D geothermal heating and cooling tax credit
The deadline to make a credit-eligible upgrade has passed. If you made a qualifying installation of a geothermal heating and cooling system by December 31, 2025, read on for how to apply this credit when you file your taxes in 2026.
View other eligible projects under this tax credit:
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Introduction
Introduction
Disclaimer: The information presented here is for educational purposes only. It is not intended to provide specific tax guidance. For questions regarding your individual tax situation, we suggest consulting with your tax advisor.
Tax Credit
30%
Expired Dec. 31, 2025
Which geothermal heating and cooling projects qualify?
Geothermal heat pump property must meet ENERGY STAR program standards in order to qualify for this tax credit.
There are a few requirements your geothermal heating and cooling system must meet to qualify for this tax credit.
First, qualifying systems must have been brand new and installed by Dec. 31, 2025.
Systems must also improve energy efficiency and meet the requirements of the ENERGY STAR program that are in effect at the time that the equipment purchase was made.
You can include labor costs associated with onsite preparation, assembly, or installation of your geothermal heating and cooling system as part of your 25D tax credit. Purchase and installation of piping and wiring required to connect new equipment with your home may also qualify for this credit, as long as they were completed by the end-of-year deadline.
Who qualifies for the 25D geothermal heating and cooling tax credit?
This tax credit applies to everyone who pays federal income taxes, as long as purchase and installation were completed by Dec. 31, 2025.
No income requirements
There are no income limitations for the 25D Tax Credit. However, like nearly all federal tax credits, you must pay federal income taxes to qualify.
All US residents who live in their homes
The 25D tax credit can be applied to a new or existing home that is located in the United States. Renters are eligible. This means that unlike 25C tax credits, 25D allows you to use the credits for a home that is under construction, as long as purchase and installation were completed by Dec. 31, 2025.
Additionally, you must live in the property at least part of the year. Landlords can never claim this credit for homes they rent out but do not use as a residence themselves.
What is the 25D geothermal heating and cooling tax credit?
The federal government offers an uncapped tax credit to cover 30% of eligible costs of purchasing and installing a geothermal heat pump for all households who pay federal income tax, as long as purchase and installation are completed by Dec. 31, 2025.
This incentive is available through the 25D Residential Clean Energy Property Credit, a US government program that covers 30% of the cost of eligible geothermal heating and cooling systems.
The 25D tax credit doesn’t just apply to geothermal technology. It also covers several other residential clean energy property upgrades, including solar panels and solar water heaters.
Here’s a list of residential projects that qualify for the 25D tax credit:
| Project Type | How much funding can you receive from 25D for qualifying projects? |
|---|---|
| Project Type:Solar panels | How much funding can you receive from 25D for qualifying projects?:30% of qualified expenditures made for property installed by Dec. 31, 2025. |
| Project Type:Solar water heaters | How much funding can you receive from 25D for qualifying projects?: 30% of qualified expenditures made for property installed by Dec. 31, 2025.
|
| Project Type:Geothermal heat pumps | How much funding can you receive from 25D for qualifying projects?: 30% of qualified expenditures made for property installed by Dec. 31, 2025.
|
| Project Type:Battery storage technology | How much funding can you receive from 25D for qualifying projects?: 30% of qualified expenditures made for property installed by Dec. 31, 2025.
|
Source: Internal Revenue Service
Tax credit limitations
The 25D geothermal tax credit will cover up to 30% of your geothermal project’s eligible costs. There’s no cap, or maximum dollar amount, for projects that qualify under this tax credit. However, all purchases and installations must be completed by Dec. 31, 2025.
Generally, you must subtract any price adjustments from the cost of the item. This can mean rebates, utility subsidies, financial incentives, and anything else that lowers the price point. This part can get a little tricky, so be sure to check the Frequently asked questions about energy efficient home improvements and residential clean energy property credits for more information.
The 25D tax credit is “non-refundable,” which means that you can't get back more than you pay in federal income taxes.
If 30% of your project’s cost is $6,000, but you only owe $1,000 in federal income taxes, you would receive a $1,000 credit.
Discover other incentives with the incentives calculator!
There are other incentives that you may qualify for. Our incentive calculator will show you a personalized list of incentives.
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