Federal Tax Credit (IRA Section 25C)
The Inflation Reduction Act provides a federal tax credit of up to 30% of the cost of a qualifying heat pump, capped at $2,000 per year. To qualify, the heat pump must meet efficiency thresholds set by the Consortium for Energy Efficiency (CEE). Most modern heat pumps with HSPF2 ratings of 7.5 or higher qualify.
This is a tax credit — not a deduction — meaning it directly reduces your federal tax bill dollar for dollar. You claim it on IRS Form 5695.
Illinois Home Performance with Energy Star
Illinois homeowners may qualify for rebates through ComEd or Nicor Gas for qualifying heat pump installations. Rebate amounts vary by equipment efficiency and utility provider. Check your utility's current rebate portal for exact amounts — these programs update periodically.
How to Maximize Incentives
- Choose a heat pump that meets CEE Tier 1 or higher efficiency requirements
- Keep all receipts and manufacturer documentation
- File IRS Form 5695 with your federal return
- Apply for utility rebates before installation when possible — some programs require pre-approval
Important Notes
Tax credits and rebate programs change. The information above reflects programs available as of 2024–2025. Always verify current eligibility with your tax advisor and utility provider before making a purchase decision.