How the One Big Beautiful Bill affects heat pump adoption

The US congressional budget bill reduces tax credits for energy efficiency investments, including heat pumps, which is expected to slow adoption rates.

From pv magazine USA

The sunset for US federal incentives is fast approaching for residential clean energy and energy efficiency tax credits, but in many states, heat pumps have more bankable options on their horizon.

The One Big Beautiful Bill (OBBB) brought a new era to clean energy tax credits. Similar to the Residential Clean Energy (Section 25D) tax credit, the OBBB snapped forward the deadline for the Residential Energy Efficient Home Improvement Tax Credit (Section 25C) from 2032 to Dec. 31, 2025.

More than 2 million households claimed about $2 billion in 25C tax credits in 2023, according to the US Department of the Treasury. About 268,000 of these credits were for heat pumps.

These tax credits did not just help consumers. According to nonprofit Rewiring America, projects supported by 25C contributed $22 billion in consumer spending for energy-efficient appliances and projects in 2023.

Heat pumps, contrary to their name, both cool homes in hot weather and provide heating when temperatures drop.

The Inflation Reduction Act’s Energy Efficient Home Improvement Credit (25C) provides up to $2,000 per year for qualified heat pumps, water heaters, biomass stoves, and biomass boilers. It also provides up to $1,200 for other energy-efficient property costs and home improvements.

The 25C credit will expire after Dec. 31, 2025, following the enactment of the OBBBA.

To continue reading, please visit our pv magazine USA website.