Geothermal heat pumps after the federal credit ended
The 30% uncapped federal credit is gone. Vermont still pays $3,000 and New Hampshire pays per ton. An honest look at whether ground-source still pencils out here.
Where geothermal stands after the federal repeal
This is the upgrade most affected by the 2025 tax changes. Section 25D covered 30% of geothermal cost with no cap — on a $40,000 ground-source installation, more than $12,000. The One Big Beautiful Bill Act terminated it for systems placed in service after December 31, 2025.
Nothing has replaced it at that scale. Vermont still pays up to $3,000 through Efficiency Vermont, and New Hampshire treats ground-source under its per-ton heat pump schedule. Both are worth having. Neither is $12,000.
Marketing material and contractor spreadsheets across the industry have been slow to update. If a proposal you are handed shows a 30% federal credit on a 2026 installation, the payback analysis attached to it is wrong — often by a decade. Ask for the numbers rerun without it. What changed →
What it is, briefly
A ground-source heat pump moves heat between your house and the earth rather than the outdoor air. Below the frost line, ground temperature in this region sits in the mid-40s°F year round, so the system never faces the −15°F air an air-source unit has to work against. That is why efficiency stays flat through the coldest part of a Vermont winter while an air-source heat pump’s capacity falls.
Two loop configurations are common here:
- Horizontal loops — trenched at 6–8 feet across roughly a half-acre or more. Cheaper to install where you have open land and the excavation will not hit ledge, which is a real qualifier in this valley.
- Vertical bores — drilled 300–500 feet. Needed on smaller lots and on the many Upper Valley properties where ledge is close to the surface. More expensive, and the drilling cost is the reason geothermal quotes vary so widely between neighbours.
What the rebates are now
| Vermont | New Hampshire | Federal | |
|---|---|---|---|
| Ground source heat pump | Up to $3,000 | Per-ton heat pump schedule: $250–$1,250/ton | 25D terminated after Dec 31, 2025 |
| Additional | Property tax exemption for geothermal systems | Regional Heat Pump Accelerator discount may apply | — |
| Income bonus | $200–$2,200 depending on utility | 100% Home Energy Assistance if income-qualified | — |
There is also a commercial pathway some installers now use: the section 48 investment credit remains available at a 6% base rate, rising to 30% where prevailing wage and apprenticeship requirements are met. That has pushed part of the industry toward third-party ownership models where an installer or financing partner owns the equipment, claims the commercial credit and passes the benefit to the homeowner through a lease or service agreement. It is a legitimate structure worth asking about — and it is not a homeowner tax credit, so read the contract carefully.
What it costs in the Upper Valley
- Horizontal loop, average house, open land: $25,000–$38,000
- Vertical bores, ledge or small lot: $32,000–$55,000
- Retrofitting distribution (ducts or low-temperature hydronic): add $8,000–$20,000
Drilling is the swing factor, and in a valley with as much shallow ledge as this one, two properties a mile apart can differ by $15,000 for identical equipment. Get the site evaluated before you take any quote seriously.
Who it still makes sense for
Being honest about it: with 25D gone, the case narrows.
- Land and a long horizon. A rural property in Orange or Windsor County where you intend to stay 20 years and can take a horizontal loop without hitting ledge.
- Large or multiple buildings. Farmsteads, houses with attached shops or barns, properties where one loop field serves several loads.
- Coming off electric resistance in New Hampshire. The enhanced per-ton tier at $1,250/ton to $6,250 applies to ground-source too, which is the strongest remaining New Hampshire case.
- You are already excavating. New construction or a major site project where the trenching cost is shared.
For most existing Upper Valley houses, a cold-climate air-source system plus a thorough envelope retrofit will deliver most of the benefit for a fraction of the capital — and the envelope carries a 75–90% rebate that geothermal does not. Compare air-source heat pumps →
Before you commit
- Get a site evaluation for ledge and water table before accepting any quote.
- Ask for a payback analysis with no federal credit in it.
- Insist on a Manual J load calculation — oversizing a geothermal system is far more expensive than oversizing an air-source one.
- Do the envelope first, for the same reason, only more so.
- Ask what happens to the loop field warranty if the installer goes out of business.
Figures checked July 2026. Rebate programs change their amounts, caps and equipment requirements during the year, and several are capped by available funding. Confirm the current offer with the program or your contractor before you sign anything.
Geothermal heat pumps: common questions
Did the geothermal tax credit really end?
Yes. Section 25D, the residential clean energy credit that covered 30% of geothermal cost with no cap, was terminated by the One Big Beautiful Bill Act for property placed in service after December 31, 2025. If your system was operational by that date you can still claim it on that year’s return with IRS Form 5695.
What is left for geothermal in Vermont?
Efficiency Vermont pays up to $3,000 on a ground-source installation, and Vermont exempts geothermal systems from property tax increases. Income-eligible households may add a utility bonus. It is meaningful money but it does not replace what 25D was worth on a $40,000 system.
And in New Hampshire?
Ground-source qualifies under the NHSaves per-ton heat pump schedule: $250 per ton up to $1,250 if displacing fossil fuel, or $1,250 per ton up to $6,250 if displacing electric resistance heat with pre-verification. That enhanced tier is the strongest remaining case for geothermal on the New Hampshire side.
Why do geothermal quotes vary so much between neighbours?
Drilling. Where ledge is close to the surface — extremely common in this valley — a horizontal loop is impossible and vertical bores are required, which can add $15,000 or more. Two properties a mile apart can genuinely differ by that much for identical equipment. Get a site evaluation before you compare bids.
Is geothermal better than a cold-climate air-source heat pump?
Technically it holds efficiency better in deep cold, because ground temperature does not drop the way air temperature does. Financially, with 25D gone, an air-source system plus a thorough envelope retrofit will beat it on payback for most existing houses here — especially since the envelope work carries a 75–90% rebate.
What about leasing or third-party ownership?
Some installers now use structures where a company owns the equipment, claims the commercial section 48 credit, and passes savings through a lease or service agreement. It is legitimate and can work, but you are signing a long-term contract rather than buying an asset. Read the escalator clauses, the buyout terms, and what happens on sale of the house.
Get a geothermal quote checked
Send us the proposal. We will tell you whether the payback numbers still hold with the federal credit removed.