Cost Guide

Heat Pump Tax Credit Canada 2026: Federal Clean Energy ITC, Home Renovation Savings, CGHAP, and How They Stack

Canadian homeowners keep hearing about a heat pump tax credit, and the honest answer is more nuanced than the marketing copy suggests. There is no American-style federal income tax credit for residential heat pump installs. What there is: a layered system of rebates, a low-income affordability program, an oil-specific federal program, and a few tax credits that touch heat pumps only in narrow circumstances. This guide walks through all of it, honestly, with what it means at CRA reporting time.

Published 2026-04-21

By The Get a Better Quote Research Team

Key Takeaways

There is no federal personal income tax credit for a heat pump install in Canada. The federal Clean Technology ITC and Clean Electricity ITC are business-only.[3]
Ontario homeowners get their heat pump savings through rebates, not tax credits: HRS up to $7,500 for electrically heated homes, $2,000 for gas-heated homes.[6]
CGHAP is the current federal low-to-median income program, $800 million envelope, direct-install model in many cases.[1]
OHPA pays up to $25,000 income-qualified (or $10,000 standard) for Ontario oil-to-heat-pump conversions.[2]
Rebates are not taxable income. They reduce the cost basis of the equipment, which matters if you ever claim CCA for business use.[4]
Medical Expense Tax Credit and MHRTC can touch heat pumps in narrow cases, but neither is a general heat pump credit.[9][10]

The federal Clean Energy / Clean Tech Investment Tax Credits: not for homeowners

The federal government introduced a suite of clean-economy Investment Tax Credits starting in 2023: the Clean Technology ITC, the Clean Electricity ITC, the Clean Hydrogen ITC, and related measures. These are genuine refundable tax credits, and the numbers are large: 30 percent of eligible capital costs in some cases, 15 percent in others.[3] The catch, and it is the most important fact in this entire guide, is that the Clean Technology ITC and Clean Electricity ITC are reserved for taxable Canadian corporations, Canadian partnerships, and certain mutual fund trusts investing in eligible property used in a business.

A homeowner installing a cold-climate heat pump in their primary residence is not eligible to claim the Clean Technology ITC. Period. Anyone telling you otherwise is misreading the legislation or confusing it with the American Inflation Reduction Act credits (the US Section 25C Energy Efficient Home Improvement Credit and Section 25D Residential Clean Energy Credit), which have no Canadian analog at the personal tax level.[3]

There is a narrow scenario where the business ITC could theoretically apply to a heat pump: a commercial property, rental building, or business-use portion of a mixed-use building where the heat pump serves eligible clean-energy generation or storage purposes. That is not what a residential homeowner is doing, and in practice even commercial heat pumps are usually claimed through different channels (like CCA Class 43.1 or 43.2). The federal ITC lane is not the right framing for a homeowner.

What Canadian homeowners actually get: the Home Renovation Savings Program

In Ontario, the current provincial program is the Home Renovation Savings Program (HRS), co-delivered by Save on Energy and Enbridge Gas. It is a rebate program, not a tax credit, and the mechanics are cleaner than a tax credit for most people: the contractor submits paperwork, the program approves, the rebate either reduces your invoice directly or arrives by cheque after installation. You do not wait until tax season to see the money.[6]

Heat Pump Rebate (HRS)	Home Heating Fuel	Amount
Air source heat pump	Electric, propane, oil, or wood	$1,250 per ton, max $7,500
Air source heat pump	Natural gas	$500 per ton, max $2,000
Ground source (geothermal)	Electric, propane, oil, or wood	$2,000 per ton, max $12,000
Ground source (geothermal)	Natural gas	Flat $3,000
Heat pump water heater	Any	Up to $500

HRS is confirmed through November 2026, though the program rules say it can close earlier if funding is exhausted.[6] Previous iterations (Greener Homes Grant, Enbridge HER+) did close suddenly when their envelopes ran out, so there is real schedule risk. If you are planning a 2026 install, do the rebate paperwork early and do not assume the program will wait for you. See our Ontario home energy rebates guide for the full program inventory and timing.

Home Renovation Savings rebate: taxable or not?

The HRS rebate is not taxable income to a homeowner. It is treated by the CRA as a reduction in the cost of the property, consistent with Interpretation Bulletin IT-273R2 on government assistance.[4] In practical terms: you do not receive a T4A, you do not add the rebate to line 13000 (Other Income), and you do not need to tell the CRA anything about it at the time you receive it.

What you do need to do is keep the paperwork. Your contractor invoice, the rebate approval letter, and any EnerGuide audit reports go in a file for at least six years. The reason is not that you will report them next April: it is that if the heat pump ever touches the tax system later (business use, home office, rental conversion, or sale of a rental-use portion), the net cost after rebates becomes your starting adjusted cost base. You want to be able to prove that number without a fight.

Canada Greener Homes Affordability Program (CGHAP): the low-income federal layer

CGHAP replaced the closed Canada Greener Homes Grant in 2026. It runs on an $800 million five-year federal budget and is specifically structured for low-to-median income households, including renters, in participating provinces. Ontario is a co-delivery province.[1] CGHAP changes three things from the old grant model that matter at tax time:

Direct-install delivery in many cases. A service organization contracts the work and pays the contractor directly. The homeowner often sees no invoice. There is nothing for the homeowner to deduct because the homeowner never paid for it.
Income assessed via CRA tax slips. Eligibility runs off your filed Notice of Assessment rather than self-declaration. If you have not filed recent returns, you cannot qualify, and you must file before applying.
Eligible costs include the heat pump, panel upgrades, tank removal, and envelope measures. CGHAP was designed to fund the full conversion, not just the equipment box.[1]

Tax reporting for a CGHAP direct-install is usually nothing on the homeowner side. There is no receipt to claim, no rebate to disclose, no T-slip. If CGHAP pays a partial reimbursement instead (less common, but possible in some delivery streams), that reimbursement follows the same government-assistance treatment as HRS: not income, but reduces the cost basis of the property.[4]

OHPA: oil-to-heat-pump conversion money, not a tax credit

The Oil to Heat Pump Affordability Program is the single biggest dollar amount available to a homeowner in Ontario, and it is specifically for households currently heating with oil. The standard stream pays up to $10,000. The income-qualified stream pays up to $25,000 if your household income sits at or below the regional median threshold set by Natural Resources Canada.[2] See our dedicated oil to heat pump conversion guide for the full cost breakdown, timeline, and rural service drop warnings.

OHPA money is, again, rebate money. Not a tax credit. The program is delivered by CLEAResult Canada on behalf of IESO and NRCan, and the contractor can usually carry the rebate so the homeowner sees only the net invoice. Tax treatment is the same as HRS and CGHAP: not income, reduces cost basis for CCA purposes if the property is ever used in a business context.[4]

Ontario provincial stacking rules

The practical stacking hierarchy in Ontario for 2026 looks like this:

HRS provincial rebate (up to $7,500 for the heat pump line item on an electric/propane/oil/wood-heated home, up to $2,000 on a gas-heated home).
Federal CGHAP layer if income-eligible. Stacks on top of HRS by design.[1]
OHPA federal layer if converting from oil (replaces or supplements CGHAP depending on stream). Stacks with HRS.
Municipal loan or forgivable programs (Toronto HELP, Ottawa Better Homes Loan, Hamilton Forgivable Loan, Brantford Forgivable Loan, Thunder Bay Grant). These are financing or city-level grants that stack on top of the rebate layer but are usually loans repaid through property tax, not cash grants.

Our Ontario HVAC rebate stacking guide walks through the real-world stacks for gas-heated, oil-heated, and income-qualified scenarios with worked examples. For the specific federal-provincial math, see our Canada Greener Homes and Ontario overlap guide.

How rebates reduce your tax basis on the heat pump

For 95 percent of homeowners this section does not matter: you install the heat pump in your home, you never use it in a business, you never sell the home as anything other than a principal residence, and the rebate simply makes the project cheaper. Done. No tax implications.

The 5 percent where it does matter: anyone with a home business, a home office deduction, a rental suite in the basement, a duplex configuration where one unit is rented, or a full rental property. In those cases, the heat pump is partly a business asset, and the CRA treats the rebates as government assistance that reduces the capital cost under subsection 13(7.1) or paragraph 12(1)(x) of the Income Tax Act.[5]

Worked example. Gas-heated semi in Hamilton with a legal basement unit that is 30 percent of the floor area. Heat pump and gas furnace replacement serves both units. Contractor invoice: $14,000. HRS rebate (gas-heated): $1,500. Net homeowner cost: $12,500.

Business-use percentage: 30 percent (matches the rental floor area).
CCA base attributable to the rental: $12,500 times 30 percent equals $3,750, not $14,000 times 30 percent equals $4,200.
Class: typically Class 43.1 or Class 8 depending on the specific equipment and CRA classification. Heat pumps meeting efficiency thresholds can land in the accelerated Class 43.1 category for business-use installations.[5]

That $450 CCA base difference is small in any one year but compounds over the 15 to 20 year life of the equipment. More importantly, if you fail to net the rebate and the CRA audits the return, they will adjust the base and may charge interest and penalties on the overclaimed CCA. Net the rebate at the time of purchase. Keep the paperwork.

CRA reporting at tax time: what actually goes on your return

For a pure residential install with no business or rental use, nothing goes on your T1 return. You do not claim the heat pump, you do not report the rebate, and you do not attach any paperwork. The rebate has already happened at the contractor level. CRA is indifferent to residential energy upgrades on personal tax returns.

For an install with business or rental use, the relevant lines are:

Form T2125 (Statement of Business or Professional Activities) if self-employed with home office use. The net-of-rebate portion of the heat pump is added to the CCA schedule under the correct class.
Form T776 (Statement of Real Estate Rentals) if the property includes a rented unit. Same treatment: net-of-rebate cost on the CCA schedule.
No separate heat pump line on the T1 itself. The T1 rolls up whatever comes from T2125 or T776.

For the small number of taxpayers who qualify for a related credit that happens to include heat pump costs:

Line 33099 or 33199 (Medical Expense Tax Credit): if a medical practitioner prescribed air conditioning for a severe chronic ailment and the heat pump delivers that function, a portion of the cost may qualify.[9] This is narrow. Talk to an accountant.
Line 45355 (Multigenerational Home Renovation Tax Credit):if the project includes building a self-contained secondary suite for a senior or person with a disability, and the heat pump is part of that suite's mechanical scope, its cost can sit inside the $50,000 eligible pool for the 15 percent credit.[10]
Line 31285 (Home Accessibility Tax Credit): narrow to accessibility-specific modifications; not a general heat pump credit.[11]

Examples: income-eligible vs standard applicant

Example 1. Standard applicant, Mississauga, gas-heated detached. Household income $135,000 combined, above CGHAP and OHPA income thresholds. Existing gas furnace and central air, 12 years old. Installs a 3-ton cold-climate heat pump as a hybrid with the existing gas furnace for backup. Install cost: $13,500.

HRS heat pump rebate (gas-heated, $500/ton x 3): $1,500
Federal CGHAP: not eligible (income)
Federal OHPA: not eligible (not oil-heated)
Net cost to homeowner: $12,000
Tax reporting: none (pure residential)

Example 2. Income-qualified applicant, Peterborough, oil-heated rural. Household income $62,000 combined, below regional median. Existing oil furnace and 900-gallon underground oil tank. Full conversion to 3-ton cold-climate heat pump plus panel upgrade from 100A to 200A plus aboveground tank decommissioning. Install total: $19,800.

OHPA income-qualified stream: up to $25,000 (covers the full project envelope)
HRS heat pump rebate (oil-heated, $1,250/ton x 3): $3,750 (stacks)
CGHAP potential additional direct-install measures: variable
Net cost to homeowner: effectively $0 to a small out-of-pocket amount, depending on program coordination
Tax reporting: none (pure residential)

Example 3. Small business owner with home office, Ottawa, electric-heated. Sole proprietor, 15 percent of the home used exclusively for business. Replaces baseboard electric with a 4-ton cold-climate heat pump. Install cost: $16,000.

HRS heat pump rebate (electric-heated, $1,250/ton x 4): $5,000 (hits the max)
Net cost: $11,000
CCA schedule on T2125: 15 percent business use equals $1,650 added to the appropriate CCA class
If the rebate were ignored: $16,000 x 15 percent equals $2,400 would hit the CCA schedule incorrectly. The $750 overclaim would compound annually and invite reassessment.[5]
Tax reporting: T2125, CCA schedule

What to watch for in 2026 and beyond

Three risks to keep on your radar if you are planning a 2026 install:

Program closure. Previous programs (Canada Greener Homes Grant, Enbridge HER+) closed suddenly when envelopes exhausted. HRS is confirmed through November 2026 but can close earlier if funding runs out.[6] Do the paperwork early.
CGHAP rollout timing. CGHAP is operational in 2026 but rolling out province by province and stream by stream. Check the NRCan portal for current Ontario availability before building your cost estimate around it.[1]
ITC for homeowners not coming. There is no current Department of Finance Canada proposal to extend the Clean Technology ITC or Clean Electricity ITC to residential homeowners. Do not plan around a hypothetical future tax credit.[3]

Related Guides

FAQs

Is there a federal heat pump tax credit for homeowners in Canada?

No, not in the way most Americans mean when they say tax credit. The federal Clean Technology ITC and Clean Electricity ITC are real Investment Tax Credits, but they are reserved for businesses, corporations, and certain partnerships investing in eligible clean-energy property. They do not flow through to individual homeowners installing a heat pump in their primary residence. What Canadian homeowners actually receive is rebates and grants: the Home Renovation Savings Program (HRS) provincially in Ontario, the Canada Greener Homes Affordability Program (CGHAP) federally for low-to-median income households, and the Oil to Heat Pump Affordability Program (OHPA) for oil-heated homes. These are rebates paid against the install cost, not line-item tax credits on your T1 return.

Do I have to report my heat pump rebate as income on my tax return?

In almost all cases, no. Rebates from HRS, CGHAP, and OHPA are treated as a reduction of the purchase price of the property rather than taxable income, which is consistent with how the CRA treats general consumer rebates. You do not typically receive a T4A for these rebates and you do not add them to line 13000 Other Income. The practical effect is that your heat pump cost you less, not that you earned taxable income. Confirm your specific situation with a tax professional, especially if you operate a home-based business or claim any portion of your home for business use, because that changes the analysis.

What is the Canada Greener Homes Affordability Program (CGHAP)?

CGHAP is the successor program to the closed Canada Greener Homes Grant, with an $800 million federal budget targeted specifically at low-to-median income households. It runs a direct-install model in many cases, meaning a service organization handles the upgrade at little or no cost to the homeowner rather than reimbursing receipts after the fact. Income eligibility is assessed using CRA tax slips, not self-declaration. In Ontario, CGHAP is designed to stack with the provincial Home Renovation Savings Program.

Is the Home Renovation Savings Program rebate taxable?

No. The HRS rebate is a reduction in the cost of the upgrade, administered by Save on Energy and Enbridge Gas. It is not income, it is not reported on a T-slip, and you do not add it to your tax return. What you should do is keep the rebate paperwork alongside your contractor invoice, because the net amount you actually paid (invoice minus rebate) is what becomes your adjusted cost base if the property is ever used for business purposes or sold as part of a rental property.

How do rebates affect my adjusted cost base if I run a home business or rent out part of my home?

The CRA position on government assistance is that it generally reduces the capital cost of the property for Capital Cost Allowance (CCA) purposes. If you claim CCA on a heat pump because it partially serves a home business or a rental unit, the rebate amount must be netted against the equipment cost before you calculate CCA. For a $14,000 heat pump with $6,000 in rebates used 20 percent for business, the CCA base would be $8,000 times 20 percent equals $1,600, not $14,000 times 20 percent. This is the main place where rebate accounting actually shows up on a tax return, and it is worth getting right.

Can I claim a heat pump under the Medical Expense Tax Credit if a family member has a condition?

Potentially, but narrowly. Section 118.2(2) of the Income Tax Act lists specific medical expenses, and modifications to a home to enable a person with a severe and prolonged mobility impairment or other qualifying condition can sometimes qualify. Air conditioning for a person with a severe chronic ailment is listed. A heat pump can function as air conditioning, but the claim has to be supported by a prescription from a medical practitioner and the expense must relate to the medical condition, not general comfort. Most ordinary heat pump replacements will not qualify. Talk to a tax accountant before making this claim.

Does the Multigenerational Home Renovation Tax Credit apply to heat pumps?

Only indirectly. The MHRTC gives a 15 percent credit on up to $50,000 of qualifying renovation expenses, for a maximum $7,500 refundable credit, but it is strictly for adding a secondary suite for a senior (65+) or an adult with a disability. If your project adds a self-contained suite and the heat pump is part of the scope for that suite, its cost can be inside the $50,000 eligible pool. It is not a standalone heat pump credit.

Where do I keep the paperwork, and for how long?

Keep the contractor invoice, the rebate approval letters, the EnerGuide pre- and post-retrofit reports if applicable, and any program correspondence for at least six years after the tax year you installed the equipment. CRA record retention is six years from the end of the tax year they relate to. If you ever use the equipment in a business context or sell the home as a rental, that paper trail is what lets you establish the correct adjusted cost base without fighting the auditor on estimates.

Natural Resources Canada Canada Greener Homes Affordability Program (CGHAP)
Natural Resources Canada Oil to Heat Pump Affordability Program (OHPA)
Department of Finance Canada Clean Technology Investment Tax Credit (business-only)
Canada Revenue Agency IT-273R2 Government Assistance: General Comments (adjusted cost base treatment)
Canada Revenue Agency Capital Cost Allowance and Government Assistance
Save on Energy Home Renovation Savings Program
Enbridge Gas Home Renovation Savings (co-delivery partner)
Ontario Ministry of Finance Ontario Energy and Property Tax Credit (OEPTC) and related tax credits
Canada Revenue Agency Medical Expense Tax Credit: section 118.2 eligible expenses
Canada Revenue Agency Multigenerational Home Renovation Tax Credit (line 45355)
Canada Revenue Agency Home Accessibility Tax Credit (line 31285)