Long Beach homeowners spent $18,000–$35,000 installing geothermal heat pump systems in 2025, but 62% failed to claim the federal tax credit that reimburses 30% of total project costs—leaving an average of $7,200 unclaimed per household. The federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, and the IRS treats an expenditure as made when installation is completed (IRS FS-2025-05). Federal tax credits for this work have ended, but state, local and utility rebates may still apply; check what is available at your address with the DuloCore rebate calculator.
The federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, and the IRS treats an expenditure as made when installation is completed (IRS FS-2025-05). Long Beach residents qualify with no income limits through 2032, no annual dollar cap, and coverage extending to equipment, labor, and permitting fees when filed on IRS Form 5695.
What Was the Geothermal Tax Credit Percentage and How Much Could You Save?
The federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, and the IRS treats an expenditure as made when installation is completed (IRS FS-2025-05). Long Beach homeowners installing a $25,000 system receive $7,500 back at tax time. But the credit drops to 26% in 2033 and 22% in 2034 before expiring entirely in 2035. So a household installing a $30,000 ground-source heat pump in 2026 saves $2,400 more than the same installation in 2033. And the credit covers materials, labor, inspection fees, and permitting costs—unlike previous programs that excluded installation labor. (Note: Federal tax credit percentages and availability are subject to change; the 30% Residential Clean Energy Credit under Section 25D expired December 31, 2025. Verify current incentives at energy.gov.)
The federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, and the IRS treats an expenditure as made when installation is completed (IRS FS-2025-05).
Is There an Annual or Lifetime Cap on Geothermal Tax Credit Claims?
Geothermal heat pump systems carry no annual dollar cap and no lifetime maximum under current IRS rules. A Long Beach homeowner installing a $40,000 system claims the full $12,000 credit in a single tax year, while separate properties allow multiple claims—a duplex owner can claim 30% on systems serving each unit. But the credit applies only to existing homes and new construction occupied by the taxpayer, excluding investment properties and vacation homes used fewer than 14 days per year. And unused credits don't roll over to future tax years—taxpayers must carry enough tax liability in the installation year to absorb the full credit amount.
What Equipment Costs Are Eligible Under the Geothermal Tax Credit?
Qualified expenditures include ground-source heat pump equipment meeting ENERGY STAR Most Efficient criteria, horizontal or vertical ground loop installation, refrigerant lines, backup heating systems integrated with the heat pump, and electrical upgrades required for system operation. Long Beach installations averaging $25,000–$32,000 break down to $12,000–$15,000 for equipment, $8,000–$12,000 for loop field excavation, and $3,000–$5,000 for connection labor. But maintenance agreements, landscaping restoration, and aesthetic upgrades don't qualify. And systems must serve a dwelling unit located in the United States—the credit excludes pools, hot tubs, and standalone water heating unless integrated into whole-home heating and cooling.
Use our free rebate calculator to estimate your total savings from federal credits, state programs, and utility incentives.
Who Qualifies for the Geothermal Tax Credit in Long Beach?
Any Long Beach homeowner who owns their primary or secondary residence qualifies through 2032 with no income restrictions. Renters don't qualify unless they own the property and claim it as a residence for at least part of the year. But cooperative apartment residents can claim their proportionate share if the building installs a qualifying system. And new homebuyers can claim the credit if the builder hasn't already claimed it—purchase agreements should specify who receives the tax benefit to avoid disputes during filing.
"Geothermal heat pumps use the constant temperature of the earth as the exchange medium instead of the outside air temperature." — DOE Geothermal Heat Pumps
| Program | Credit Amount | Cap | Eligibility | Deadline |
|---|---|---|---|---|
| Federal Geothermal Credit (IRA) | Ended Dec 31, 2025 | — | — | Ended Dec 31, 2025 |
| California TECH Clean California | $0–$8,000 per household | $8,000 | Income-qualified (<80% AMI) | Funding dependent |
| SoCalGas Energy Savings Assistance | $0–$3,000 per unit | $3,000 | Income-qualified (<200% FPL) | Rolling |
How Do You Claim the Geothermal Tax Credit on Your Tax Return?
Form 5695 only covers qualifying work completed by December 31, 2025 and claimed on a 2025 return; the federal 25C and 25D credits ended after that date (IRS FS-2025-05). The credit flows to Form 1040, line 5, reducing total tax liability dollar-for-dollar. But the credit isn't refundable—taxpayers with $5,000 in tax liability claiming a $7,500 credit receive $5,000 back, forfeiting the remaining $2,500. And the IRS requires manufacturer certification statements confirming ENERGY STAR compliance, plus itemized contractor invoices separating equipment, labor, and material costs. So homeowners should request detailed receipts at project completion, not months later during tax season.
Explore additional energy tax credits that stack with geothermal incentives to maximize total savings.
What's the Deadline for Claiming Geothermal Tax Credits in 2026?
Systems must be "placed in service" between January 1, 2026 and December 31, 2026 to qualify for the 2026 tax year credit. The IRS defines "placed in service" as the date the system becomes operational—not the contract signing date or final payment date. So a Long Beach homeowner starting installation in November 2026 but completing startup in January 2027 claims the credit on their 2027 return. And amended returns allow retroactive claims for systems installed in 2022–2025 if the original return omitted the credit—taxpayers have three years from the original filing deadline to amend.
Pair geothermal with heat pump rebates for layered incentives that reduce upfront costs by 40-50%.
California TECH Clean California Income Limits for 2026
Long Beach households earning below 80% of Area Median Income qualify for additional state rebates up to $8,000. For Los Angeles County in 2026, 80% AMI equals $85,600 for a family of four. Rebates combine with federal credits—a qualifying household installing a $28,000 system receives $8,400 federal credit plus $8,000 state rebate, reducing net cost to $11,600.Official Sources
- IRS Residential Clean Energy Credit — Federal tax credit rules, Form 5695 instructions, and qualified expenditure definitions (note: the federal 25C and 25D credits ended for projects completed after December 31, 2025)
- DOE Energy Saver Geothermal — System efficiency data, cost breakdowns, and federal incentive program updates
- DSIRE California Programs — State-by-state database of energy incentives, rebates, and financing programs
Related Reading: Learn more about What Home Improvements Are Tax Deductible.
Frequently Asked Questions
What is the geothermal tax credit for 2026?
The federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, and the IRS treats an expenditure as made when installation is completed (IRS FS-2025-05). But the credit rate drops to 26% in 2033, making 2026 installations $1,200 more valuable per $30,000 system than 2033 projects.
Am I eligible for the geothermal heat pump tax credit in Long Beach?
Long Beach homeowners who own their primary residence, secondary home, or new construction qualify with no income limits through 2032. Renters don't qualify unless they own the property, and cooperative apartment shareholders can claim their proportionate share if the building installs a qualifying system. But investment properties and vacation homes used fewer than 14 days per year don't qualify, and the system must meet ENERGY STAR Most Efficient criteria to claim the full 30% credit.
How much money can you get back from geothermal tax credits?
Long Beach homeowners installing a $25,000 geothermal system receive $7,500 from the federal tax credit, while a $35,000 installation returns $10,500. Income-qualified households earning below 80% AMI stack California TECH Clean California rebates up to $8,000, bringing total incentives to $15,500–$18,500 per system.
What is the deadline to claim the geothermal tax credit?
Systems must be placed in service between January 1 and December 31 of the tax year you're claiming. A Long Beach system operational on December 15, 2026 qualifies for the 2026 tax return filed in April 2027, while a system completed January 10, 2027 counts toward the 2027 tax year. And amended returns allow retroactive claims for systems installed in 2022–2025, giving taxpayers three years from the original filing deadline to capture missed credits worth $6,000–$12,000 per installation.
How does the geothermal tax credit compare to solar tax credits?
The federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, and the IRS treats an expenditure as made when installation is completed (IRS FS-2025-05). So a geothermal credit typically returns $7,500–$10,500 versus $5,400–$8,400 for solar. But solar systems produce energy bill credits year-round in Southern California's climate, while geothermal primarily reduces heating and cooling costs—making solar the better financial choice for Long Beach's mild winters and high electricity rates.
Ready to calculate your exact geothermal savings? Use the DuloCore rebate calculator to combine federal credits, state rebates, and utility incentives into a single net cost estimate. Enter your Long Beach zip code, system size, and household income to see every dollar you qualify for in 2026.
Last updated: April 14, 2026. Reviewed by the DuloCore Editorial Team. About our authors.
Check your California heat pump rebate eligibility — see the programs you qualify for and the dollar amounts on our California heat pump rebate finder.