Time is Running Out: Federal Geothermal Tax Credit Ends December 31, 2025
If you have a geothermal heating and cooling system that’s over 9–15 years old, replacement isn’t a question of if—it’s a question of when. The smart move is to replace now while you can still take advantage of a 30% federal tax credit, before it disappears at the end of this year.
At AA Service Co., we’re committed to keeping our customers informed and making sure you never miss an opportunity to save.
What Is the 25D Residential Clean Energy Credit?
The Residential Clean Energy Credit (25D) currently allows homeowners to claim 30% of the total installed cost of an ENERGY STAR® qualified geothermal heat pump system. That means you can get thousands of dollars back when upgrading your system—including not just the equipment itself, but also labor, piping, and wiring.
But here’s the catch: the credit expires on December 31, 2025. After that, there are no federal tax incentives for geothermal replacements.
Why You Shouldn’t Wait
Many homeowners put off replacement until their system fails, but with geothermal, that could be a costly mistake. If you wait until next year, you’ll be replacing your system at full price, with no tax credit to offset the cost.
And there’s another factor: as the deadline approaches, demand for geothermal replacements will spike. Factory production and installation schedules will fill up quickly, making it harder to get your project completed in time to qualify. Acting now ensures you lock in both your savings and your installation date.
What’s Eligible for the Tax Credit?
To qualify, your system must meet ENERGY STAR® standards and be installed in a U.S. residence. Covered expenses include:
- Geothermal equipment that uses stored solar energy from the ground
- Labor for site preparation, assembly, and original system installation
- Piping and wiring to connect the system to your home
Not covered: previously used equipment, systems for pools or hot tubs, or installations in rental-only homes.
How to Claim the Credit
The credit is claimed on your federal tax return using IRS Form 5695. It can be applied against both regular income tax and alternative minimum tax (AMT). There’s no limit on the credit amount, and it can even be combined with other renewable energy credits such as solar and wind.
Important: Always consult with your tax professional to confirm eligibility and understand how the credit applies to your situation.
Why Choose AA Service Co.?
For decades, AA Service Co. has been trusted by Chicagoland homeowners for heating, cooling, plumbing, and more. If your geothermal system is over 9–15 years old, our licensed experts can help you evaluate your options, secure your installation, and make sure you don’t miss this limited-time tax credit.