Sacramento homeowners installing geothermal heat pumps in 2026 no longer receive a federal tax credit. 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). 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).
What is the geothermal tax credit percentage and how much can you save in Sacramento?
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). Sacramento installations typically run $24,000–$30,000.
Local contractors report average system costs of $26,500 for a 3-ton ground-source heat pump serving a 1,800-square-foot home. SMUD's $3,000 heat pump rebate drops net costs to $23,500.
What are the annual and equipment caps for the geothermal tax credit?
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).
In Sacramento's high-cost market, drilling costs push total expenses 15–20% above national averages.
Which geothermal equipment qualifies for the Sacramento tax credit?
Eligible systems must meet ENERGY STAR criteria and use the ground or groundwater as a heat source. Closed-loop horizontal or vertical systems qualify, as do open-loop configurations drawing from wells or ponds.
Equipment requirements include a coefficient of performance (COP) of at least 3.3 for heating and an energy efficiency ratio (EER) of 16.2 for cooling. Sacramento soil conditions favor vertical bore systems, which drill 150–300 feet deep. Or horizontal loops work in properties with 0.5+ acres of excavatable land.
| System Type | COP Requirement | EER Requirement | Sacramento Avg Cost |
|---|---|---|---|
| Vertical closed-loop | 3.3+ | 16.2+ | $28,000–$35,000 |
| Horizontal closed-loop | 3.3+ | 16.2+ | $22,000–$28,000 |
| Open-loop (well) | 3.3+ | 16.2+ | $18,000–$24,000 |
Are there income limits for claiming the geothermal tax credit in Sacramento?
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).
What IRS form do you need to file for the geothermal tax credit?
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).
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).
When did the geothermal tax credit start and when does it end in Sacramento?
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). Systems installed between 2017 and 2021 qualified for gradually declining percentages—30% through 2019, 26% in 2020, and 22% in 2021. But the IRA reset the rate to 30%, before the credit ended for expenditures made after December 31, 2025 (IRS FS-2025-05).
So homeowners who installed geothermal systems in 2024 or 2025 claimed 30% credits on those years' tax returns. Installations completed in 2026 or later receive no federal credit.
Can you stack the geothermal tax credit with other federal or state incentives?
Federal tax credits no longer apply to new geothermal installations (IRS FS-2025-05). SMUD offers $3,000 rebates for geothermal heat pump installations. So a $26,000 system receives a $3,000 SMUD rebate.
But state tax credits operate differently. California doesn't currently offer state-level geothermal tax credits, so Sacramento homeowners rely on utility programs. And property tax exemptions exist for renewable energy equipment—California's AB 1451 excludes geothermal systems from property tax reassessment. Or homeowners can finance through PACE loans (Property Assessed Clean Energy) at below-market interest rates.
Check the rebate calculator to model utility savings for your specific installation.
What is the step-by-step application process for the Sacramento geothermal tax credit?
First, hire a certified contractor to install an ENERGY STAR-qualified geothermal system. Obtain itemized invoices showing equipment costs, labor, permits, and materials. Then verify the system meets COP and EER requirements—contractors provide a certification letter for your tax records.
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).
Official Sources
- DOE Geothermal Heat Pumps — Federal technical specifications and efficiency standards for qualifying systems
- ENERGY STAR Save Energy, Save Money — Database of federal, state, and utility rebate programs by ZIP code
- DSIRE USA — Comprehensive state-by-state renewable energy incentive tracker
Related Reading: Learn more about Is The Geothermal Tax Credit Still Available and Solar Investment Tax Credit Itc.
Frequently Asked Questions
What is the geothermal tax credit amount in Sacramento?
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).
Are geothermal systems eligible for tax credits in California 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). California doesn't offer state-level geothermal tax credits in 2026, but utility rebates like SMUD's $3,000 program are available. (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.)
How do I apply for the geothermal tax credit in Sacramento?
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).
What is the deadline for claiming geothermal 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).
Can I combine geothermal tax credits with other energy rebates?
Federal tax credits no longer apply (IRS FS-2025-05), but SMUD rebates, state property tax exemptions, and PACE financing can still be combined. Sacramento homeowners can use SMUD's $3,000 rebate to cut costs by $3,000 on a $26,000 system. And property tax exclusions prevent assessment increases from adding system value.
Ready to calculate your savings? Use our free rebate calculator to estimate utility rebates for your Sacramento geothermal installation. Get personalized savings projections based on your system size, property type, and household income—results in under 60 seconds.
Last reviewed: April 14, 2026. Reviewed by DuloCore Energy Specialists. About the team.
Check your California heat pump rebate eligibility — see the programs you qualify for and the dollar amounts on our California heat pump rebate finder.