There are various state and federal incentives for installing heat pumps for heating/cooling and water heating, including rebates, tax credits and interest-free loans. Access to some of these incentives depends on multiple factors, including who supplies your electricity and household income.
Mass Save Incentives* and HEAT Loan Program
Mass Save offers residential heat pump rebates of up to $10,000 for air-source heat pumps (ASHPs) and $15,000 for ground-source heat pumps (GSHPs), with additional incentives for low and moderate income households.
Starting in 2023, residential heat pump rebates will be available only for equipment installed by companies who are part of the Mass Save Heat Pump Installer Network (HPIN). To find qualified installers, go to Mass Save “Find a Participating Contractor Near You”. Some installers include an estimate of the Mass Save rebate in their quotes, and some will submit the rebate request on behalf of their customer. To confirm your rebate amount, contact Mass Save directly before you commit to an installation.
Your electricity must be supplied by an investor-owned utility such as Eversource or National Grid to qualify for Mass Save rebates.
New ASHP minimum energy efficiency requirements will go into effect on January 1, 2023. To ease the transition to the new requirements, ASHPs that meet the 2022 requirements and installed in calendar 2023 will continue to be eligible. See 2023 Air Source Heat Pump Minimum Efficiency Requirement.
The Mass Save HEAT Loan Program provides interest-free loans of up to $25,000 for heating system and weatherization upgrades.
*Mass Save Incentives may be available to natural gas customers, please contact Mass Save directly to learn more.
Municipal Light Plant (MLP) Customers
If your electricity is supplied by a municipal light plant (MLP), check with the MLP to learn about available incentives. Some MLPs provide incentives that are comparable to MassSave rebates: Massachusetts Clean Energy Center for more information on MLP Communities. To find the MLP in your area: Map of Massachusetts Electricity Providers by Municipality
Federal Tax Credits
These credits are increasing substantially in 2023 and will remain in effect for at least 10 years under tax changes mandated by the Inflation Reduction Act signed in August, 2022. Check with your tax preparer on all available credits. See IRS Fact Sheet.
- For ASHPs and heat pump water heaters (HPWHs) installed in calendar 2022, a modest federal tax credit of up to $300 each and not more than $500 for both is available when you file your 2023 federal tax return.
- ASHPs installed after December 31, 2022 may qualify for a tax credit of up to $2,000.
- HPWHs installed after December 31, 2022 may qualify for a tax credit of 30% or $2,000, whichever is lower.
- GSHPs installed in calendar 2022 may qualify for a 26% credit. The credit increases to 30% for installation in 2023 an will remain at that level for at least 10 years. The credit is based on the total installation cost.
MA Sales Tax Exemption
According to the Mass.gov Guide on Sales and Use Tax under the topic Sales and Use Tax Exempt Items-Home & Household Items: “Equipment directly related to solar, wind-powered or heat-pump systems (if the system is used as a primary or auxiliary power system for heating or supplying a taxpayer’s principal residence in Massachusetts)” is exempt from Massachusetts sales tax. In our experience, most Massachusetts HVAC installers do not charge sales tax, which is consistent with this exemption.
- Massachusetts Energy Rebates & Incentives
- Abode Energy Management: List of Massachusetts Municipal Light Plants
- Massachusetts Alternative Energy Portfolio Standards (APS)
- Mass.gov: Qualifying Ground Source Heat Pumps in the APS
The Inflation Reduction Act (IRA) enables residential households to access loans, rebates and incentives towards sustainable heating and cooling solutions for their homes. There are four sections applicable to homeowners:
- Part 2 – Residential Efficiency and Electrification Rebates
- Sec. 50121 Home Energy Performance Based, Whole House Rebates (pg. 217-20)
- Sec. 50122. High-Efficiency Electric Home Rebate Program (pg. 220-25)
- Sec. 50123 State-based Home Energy Efficiency Contractor Training Grants (pg. 225)
- Part 3 – Building Efficiency and Resilience
- Sec. 50131. Assistance for Latest and Zero Building Energy Code Adoption. (pg. 225-26)
Other Resources on the IRA and Residential Electrification
- Massachusetts Clean Energy Center Clean Energy Solutions to help Massachusetts homeowners save money on their energy bills while protecting the environment.
- IRA Savings Calculator Learn which IRA benefits may be available to you with this online calculator. This is one of the more useful resources for most households.
- Rewiring America This site hosts the above linked calculator and includes other useful information about the IRA.
- US Inflation Reduction Act 2022 Loan Programs Office (with Video)
- Inflation Reduction Act Miniguide (pdf) (pg. 12-13)
- ACEEE: Home Energy Upgrade Incentives 2022
- America is All In: All in On Building Decarbonization in the Age of the Inflation Reduction Act
- What is in the bill? Explains the key programs in the IRA. It includes information on tax deductions and credits for EVs and residential solar and battery storage and more
- Guide to the Inflation Reduction Act Download an easy-to-read pdf guide to the IRA with a glossary of terms, detailed case studies and helpful tips on how to create an electrification plan
- Guide to Electrify Everything in Your Home is an extensive handbook that helps you create an electric plan for your home for a step-to-step process towards a net-zero future.
Note: The HeatSmart Alliance aims to provide its members and the public with accurate and up-to-date information, however we are not responsible for content on webpages outside of our website. Both federal and state incentives may be subject to change. (Last Updated 12.21.2022)