Indiana Heat Pump Rebates & Incentives Guide

Quick Answer: Indiana Heat Pump Rebates Overview

Indiana's state government does not offer a direct rebate program for heat pump installations. Homeowners can access federal tax credits applicable statewide. These credits are supplemented by utility-level rebate programs from local electric cooperatives.

The federal incentives stem from the Inflation Reduction Act (Public Law 117-169). This act expanded and extended the Energy Efficient Home Improvement Credit (26 U.S. Code §25C) and the Residential Clean Energy Credit (26 U.S. Code §25D). These credits are claimed on federal tax returns and do not require state action.

Indiana's utility-level incentives are managed by local electric cooperatives. Cooperatives such as Marshall County REMC, Wabash Valley Power Association (WVPA) and its 28 member cooperatives, Utilities District of Western Indiana REMC, Southern Indiana Power, Heartland REMC, South Central Indiana REMC, and RushShelby Energy provide residential rebate programs. Eligible equipment typically includes air-source, geothermal, and dual-fuel heat pumps, along with heat pump water heaters.

To qualify, you generally must live within the utility's service territory, meet minimum equipment efficiency standards, and have the system installed by a licensed contractor. Rebate amounts vary by utility and are subject to annual changes. Always confirm current details directly with your cooperative before making a purchase.

Federal Tax Credits for Indiana Heat Pump Installations

Energy Efficient Home Improvement Credit (26 U.S. Code §25C)

This credit applies to improvements made to existing homes. The Inflation Reduction Act (Public Law 117-169) restructured this credit for tax years 2023 and beyond.

The credit equals 30% of the cost of qualifying equipment, with an annual cap of $2,000 specifically for heat pumps. This $2,000 limit applies collectively to air-source heat pumps, geothermal heat pumps, and heat pump water heaters. The credit resets each year, allowing claims of up to $2,000 annually for qualifying installations.

Other §25C caps, separate from the heat pump limit, include:

• Up to $600 for qualifying energy-efficient windows or central air conditioners
• Up to $150 for a home energy audit
• Up to $600 for electrical panel upgrades

Equipment must meet efficiency standards set by the Consortium for Energy Efficiency (CEE) or have the ENERGY STAR Most Efficient designation. For air-source heat pumps, this typically means meeting CEE Advanced Tier requirements. As of 2023, these requirements exceed federal minimum SEER2 and HSPF2 ratings. Consult IRS and ENERGY STAR program guidelines for current tier thresholds, as they are updated periodically. Your installer should provide an AHRI certificate confirming the equipment meets the required ratings.

Claim this credit on IRS Form 5695 when filing your federal tax return.

Residential Clean Energy Credit (26 U.S. Code §25D)

This credit primarily applies to geothermal heat pump systems. It covers 30% of the total installed cost with no dollar cap through 2032. The rate decreases to 26% in 2033 and 22% in 2034 before expiring (26 U.S. Code §25D).

Unlike §25C, there is no annual limit for this credit. The §25D credit covers full installed costs, including labor. This is particularly beneficial for geothermal systems, where drilling and loop installation represent significant project expenses.

These federal credits can be combined. A geothermal system installation may qualify for §25D, while other qualifying improvements made in the same tax year can still be claimed under §25C. Consult a tax professional for specific advice.

IRA Rebate Programs (HOMES and HEAR)

The Inflation Reduction Act also established two point-of-sale rebate programs: the HOMES Rebate Program (IRA §50122) and the High-Efficiency Electric Home Rebate Act program (IRA §50123, known as HEAR). HEAR offers up to $8,000 for a qualifying heat pump HVAC system and up to $1,750 for a heat pump water heater. However, HEAR is income-capped at 150% of the area median income and is administered at the state level. Confirm Indiana's rollout timeline for these programs with the Indiana Office of Energy Development or check DSIREUSA.org for current status.

Indiana Local Utility Heat Pump Rebate Programs

Marshall County REMC

Marshall County REMC manages its rebate program through the Power Moves platform (powermoves.com/rebates/residential). The program covers dual-fuel heat pumps, air-source heat pumps, geothermal heat pumps, heat pump water heaters, and Wi-Fi thermostats. You can submit applications online or by mail. Specific rebate amounts vary. Contact Marshall County REMC or visit the Power Moves site for current figures.

Wabash Valley Power Association and Member Cooperatives

WVPA is a generation and transmission cooperative that supplies wholesale electricity to 28 distribution cooperatives across Indiana, Ohio, Michigan, Missouri, and Illinois (powermoves.com/rebates/residential). Residential customers of member cooperatives can receive rebates for heat pump water heaters, geothermal heat pumps, air-source heat pumps, and HVAC equipment. A signed application is required. Since WVPA operates through its member cooperatives, identify your specific cooperative and confirm its participation. Visit the WVPA membership page to find your cooperative.

Utilities District of Western Indiana REMC

UDWI REMC offers rebates for energy-efficient heat pumps, water heaters, and air conditioners (udwiremc.com/my-services/member-programs/rebates). The geothermal heat pump incentive is available for both new construction and retrofit installations. Applications must be completed and signed by both the contractor and the member. They must also include an AHRI certificate and a copy of the paid receipt. Submit the application within 30 days of installation; this deadline is strictly enforced.

Southern Indiana Power

Southern Indiana Rural Electric Cooperative offers rebates for air-source, dual-fuel, and geothermal heat pumps, as well as energy-efficient water heaters (sinpwr.com/content/2020-residential-rebates). Equipment can be installed in new construction, existing homes, or mobile homes. Rebate amounts vary based on equipment efficiency, installation location, and system capacity. Submit a completed application form to the cooperative for processing.

Heartland REMC

Heartland REMC serves customers in north-central Indiana and provides rebates for efficient heat pumps and water heaters (heartlandremc.com/rebates). For specific rebate amounts and current program requirements, contact the Heartland REMC Energy Adviser. Publicly available program details are limited, so direct contact is recommended.

South Central Indiana REMC

South Central Indiana REMC, a

Federal Tax Considerations

Heat pump installations may qualify for federal tax credits under specific provisions of the Internal Revenue Code (IRC). Notably, IRC § 25C and § 25D provide significant incentives for energy-efficient home improvements and renewable energy systems, respectively.

• IRC § 25C allows for a 30% credit on the cost of qualifying heat pumps and heat pump water heaters, up to a $2,000 annual cap, separate from the $1,200 general envelope cap.
• IRC § 25D offers a 30% uncapped credit for geothermal heat pumps (ground-source), provided the equipment meets the CEE highest-efficiency tier or ENERGY STAR Most Efficient standards.
• Tax credits must be claimed using Form 5695, which details the energy efficiency improvements made.
• Be aware that these credits apply to the tax year in which the installation is completed, so timing is crucial for tax planning.
• Indiana generally conforms to federal tax credits, but it’s essential to verify any state-specific nuances with a local CPA.

This is not tax advice — consult a CPA familiar with Heat pump rebates for your specific situation.

Available Rebates & Incentives

• Marshall County REMC - Residential Energy Efficiency Rebate Program: Offers incentives for homeowners to upgrade high-energy systems, including heat pumps. Eligibility requires completion of specific project requirements.
• Wabash Valley Power Association - Residential Energy Efficiency Program: Provides rebates for heat pump water heaters, geothermal and air-source heat pumps. Available to residential customers of member organizations.
• Utilities District of Western Indiana REMC - Residential Energy Efficiency Rebate Program: Incentives for energy efficient heat pumps and water heaters, requiring contractor completion and specific documentation.
• Southern Indiana Power - Residential Energy Efficiency Rebate Program: Offers rebates for high efficiency heating and cooling equipment, including various types of heat pumps. Eligibility varies by equipment type and installation location.
• Heartland REMC - Residential Energy Efficiency Rebate Program: Rebates for efficient heat pumps and water heaters available to residential customers in north-central Indiana.
• South Central Indiana REMC - Residential Energy Efficiency Rebate Program: Incentives for air-source and geothermal heat pumps, requiring installation by licensed contractors.
• RushShelby Energy - Residential Energy Efficiency Rebate Program: Provides rebates for energy efficient heat pumps and water heaters for permanent residences occupied year-round.

Federal Tax Deductions

The IRS offers the Energy Efficient Home Improvement Credit (IRS §25C), which provides a 30% credit up to $2,000 per year for qualifying heat pumps and related upgrades. Additionally, the Inflation Reduction Act includes the HOMES Rebate Program and HEAR for income-capped households, offering substantial rebates for energy-efficient home improvements. Consult a tax professional for personalized advice and to ensure compliance with eligibility requirements.

Frequently Asked Questions

Why doesn't Indiana have a statewide heat pump rebate program?

Indiana's state government has not implemented a specific rebate program for heat pumps, leaving federal tax credits and local utility incentives as the primary financial support for homeowners.

What federal laws apply to heat pump incentives in Indiana?

Homeowners in Indiana can benefit from federal tax credits under 26 U.S. Code §25C and §25D, which provide significant financial incentives for energy-efficient home improvements and clean energy installations.

Are there any active legislative proposals regarding heat pump incentives in Indiana?

As of now, there are no widely reported active legislative proposals specifically aimed at establishing a statewide heat pump rebate program in Indiana.

What do Indiana residents do to access heat pump incentives given the lack of state regulation?

Residents typically rely on federal tax credits and local electric cooperative rebate programs, which vary by utility provider, to help offset the costs of heat pump installations.

How do Indiana's heat pump incentives compare to neighboring states?

Many neighboring states have more robust state-level rebate programs for heat pumps, while Indiana primarily offers federal incentives and local utility support.