Did you upgrade your home comfort last year with a highly efficient ground-source heat pump? If you completed your installation by the end of 2025, you might be eligible for substantial savings through the 25D tax credit geothermal systems benefit. While the federal deadline for new installations has passed, homeowners who took action before December 31, 2025, can still claim this lucrative 30 percent tax credit on their 2026 tax returns. In this guide, we will explore the specifics of the Residential Clean Energy Credit, provide steps on how to file for your credit this year, and explain why geothermal technology remains an outstanding investment for homeowners in Northbrook, Evanston, Deerfield, and the surrounding areas.
What Was the 25D Tax Credit?
The Residential Clean Energy Credit, commonly known as Section 25D, was a federal incentive designed to encourage homeowners to adopt renewable energy technologies. For qualifying geothermal heat pumps, the program offered a 30 percent tax credit on the total cost of purchase and installation. Due to recent legislative changes, the program officially expired on December 31, 2025. However, if your system was placed in service prior to that deadline, you are fully eligible to claim the 30 percent credit when filing your current taxes.
Eligibility Requirements for Your Geothermal Setup
To ensure your installation qualifies for the credit, the equipment must meet specific criteria. First, the geothermal heat pump must be ENERGY STAR certified. Second, the system must use the ground or groundwater as a thermal energy source to heat your home or as a thermal energy sink to cool your home. Finally, the equipment must have been installed at a residence you own in the United States. Whether you live in a primary residence in Highland Park or a secondary home in Glenview, the system qualifies as long as it was fully operational before the cutoff date.
Necessary Tax Forms
Claiming your 25D tax credit geothermal systems benefit requires a bit of paperwork during tax season. Homeowners in Glencoe, Lake Forest, and Skokie will need to complete IRS Form 5695, titled Residential Energy Credits. You must submit this form alongside your standard federal income tax return. Keep all your installation receipts, manufacturer certification statements, and contractor invoices handy to verify the total cost of your project.
Carrying Forward Unused Credits
It is important to note that the Section 25D credit is nonrefundable. This means the credit can reduce your federal income tax liability to zero, but it will not result in a direct cash refund for any amount that exceeds what you owe. Fortunately, the IRS allows you to carry forward any unused portion of the credit to subsequent tax years. We strongly recommend consulting with a certified tax professional in Wilmete or Winnetka to navigate your specific financial situation and maximize your tax savings.
The Ongoing Value of Geothermal Heating and Cooling in Chicagoland
Exceptional Energy Efficiency
Even though the federal tax incentive has concluded for new installations, geothermal systems continue to be one of the smartest investments you can make for your home. Traditional A/C units and furnaces rely on the fluctuating outside air, which forces them to work harder during the extreme weather we experience in the northern suburbs. Geothermal systems leverage the constant underground temperature to provide incredibly efficient heating and cooling. This translates to significantly lower monthly utility bills for homeowners in Highwood, Lake Bluff, and Libertyville.
Reliable Comfort All Year Long
AA Service Co. has been providing exceptional heating and cooling solutions since 1965. We understand the unique climate challenges of our region. Geothermal heat pumps deliver consistent, even temperatures throughout your home without the noisy operation associated with conventional outdoor A/C compressors. Because the main components are sheltered indoors or underground, these systems also boast a much longer lifespan than standard HVAC equipment. Upgrading your home with a geothermal unit means investing in decades of reliable comfort.
Filing for the 25D tax credit geothermal systems benefit is a crucial step for homeowners who upgraded their equipment in 2025. By submitting the proper forms, you can significantly offset the initial cost of your highly efficient ground-source heat pump. While the federal credit has ended, the long-term energy savings and superior comfort provided by geothermal technology make it a worthwhile upgrade. These systems provide unmatched efficiency and reliability for homes across the entire region.
Ready to Optimize Your Home Comfort? Contact Us Now
Are you ready to schedule maintenance for your existing geothermal heat pump or looking to upgrade your home A/C and heating equipment? The experienced technicians at AA Service Co. are here to help. We have been proudly serving communities like Barrington, Chicago, Green Oaks, Northfield, and Northbrook since 1965. Contact us today to ensure your HVAC system is running at peak performance. Call our office, or visit us at 550 Anthony Trail, Northbrook, IL 60062 to schedule your next service appointment.