How to Claim the 30% Federal Geothermal Tax Credit + NY, NJ & CT State Rebates

 

If you’ve installed, or are planning to install, a geothermal heating and cooling system, you could qualify for some of the most substantial home energy incentives available in the U.S. The federal government offers a 30% Residential Clean Energy Tax Credit for qualifying geothermal systems installed through December 31, 2025. That means if your system was installed by this deadline, you can claim the credit on your 2025 taxes filed in 2026.

In addition to the federal credit, homeowners in New York, New Jersey, and Connecticut can still take advantage of state-specific rebates, which work alongside the federal incentives.

What Is the 30% Federal Geothermal Tax Credit?

Under Section 25D of the U.S. Tax Code, homeowners who installed a qualifying ground source heat pump before the end of 2025 can receive a tax credit equal to 30% of the total system cost, including equipment and installation labor. There’s no maximum dollar limit, so a $30,000 system could qualify for a $9,000 credit.

This credit is non-refundable, meaning it reduces your federal tax bill. Any unused portion can be carried forward to future tax years.

➡️ Learn more: Geothermal Installation Cost

Who Qualifies?

To be eligible for the federal credit:

  • Your system must be ENERGY STAR® certified.

  • It must use ground or groundwater as a thermal energy source for heating and cooling your primary or secondary U.S. residence.

  • Both new construction and existing homes qualify.

  • Renters typically do not qualify.

How to Claim the Credit: IRS Form 5695

Claiming the credit is simple if you follow these steps:

  1. Gather invoices showing your equipment and installation costs.

  2. Confirm your system is ENERGY STAR certified.

  3. For systems installed in 2025, include your installer’s 4-digit Qualified Manufacturer (QM) code.

  4. Enter the total qualifying cost on Part I, Line 5b (geothermal heat pump costs) of Form 5695.

  5. Multiply by 30% to determine your credit.

  6. Attach Form 5695 to your Form 1040 and claim the credit on Schedule 3.

Always consult a tax professional to ensure accuracy based on your personal situation.

👉 Explore more: Residential Geothermal Heating and Cooling Systems

State Rebates in NY, NJ & CT

Homeowners in New York, New Jersey, and Connecticut can combine state incentives with the federal credit to lower geothermal system costs. In New York, the NYS Tax Credit covers 25% of system costs, up to $10,000, and utility rebates from NYSEG and Con Edison can add thousands more. NYSERDA also offers low-interest loans. Connecticut’s Energize CT program provides up to $15,000 for eligible customers, while New Jersey offers rebates through the NJ Clean Energy Program. Together with federal incentives, these programs can cover a significant portion of your installation cost.

Why Act Now

Even though the 30% federal credit only applies to systems installed through 2025, state programs in NY, NJ, and CT are still fully active. Geothermal systems can cut energy bills by up to 70% compared to traditional HVAC systems. With the combination of state rebates and utility incentives, now is an ideal time to switch.

Our team at GEO LLC helps homeowners across the Tri-State area navigate every available incentive, manage paperwork, inspections, and installation, so you just enjoy the savings.

Get Your FREE Geothermal Estimate

Stop overpaying for energy. See what geothermal can save you today!

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