- The Terraform licence in plain English
- The detail worth knowing: a product can't become competitive later
- The three definitions that decide whether you're competing
- Is HCP Terraform free?
- HCP Terraform prices, as of October 2026
- How to start with Terraform for free
- My verdict: is Terraform free for you?
- Frequently asked questions
Yes, Terraform is free to use, including in production, but it's no longer open source. Since version 1.6.0 it's under the Business Source License, which lets you use it free unless you offer it to others as a competing paid product. HCP Terraform, the hosted service, also has a free plan for up to 500 managed resources.
So for nearly every business using Terraform to build its own cloud setup, the answer is simply yes. Below is exactly what the licence file and HashiCorp's own docs say, checked as of October 2026, plus what the hosted plans cost once you outgrow the free tier.
The Terraform licence in plain English
The licence file in the Terraform repository names the licensor as International Business Machines Corporation (IBM) and covers Terraform version 1.6.0 or later. Its key clause, the Additional Use Grant, says you may make production use of Terraform, provided you don't offer it to third parties on a hosted or embedded basis to compete with IBM's paid versions.
| What you want to do | Free under the licence? |
|---|---|
| Run Terraform to manage your own company's infrastructure | Yes, the licence says internal use isn't a competitive offering |
| Use it across affiliated companies in your group | Yes, IBM counts affiliates under common control as one organisation |
| Build a free tool on top of Terraform | Yes, products not offered on a paid basis aren't competitive |
| Sell a hosted service that overlaps with IBM's paid Terraform | No, that's a competitive offering |
There's also a built-in expiry on the restriction. The licence sets a Change Date of four years from when each version is published, after which that version moves to the Mozilla Public License 2.0. Older code becomes open source again over time.
The detail worth knowing: a product can't become competitive later
This is the clause that should reassure anyone building tooling. The licence says that if your product isn't a competitive offering when you first make it available, it won't become one later just because IBM releases a new paid version with extra features. You aren't exposed to IBM moving the goalposts after you launch.
The three definitions that decide whether you're competing
If you build anything that touches Terraform, these are the words in the licence that do the work. I've kept them close to the original.
| Term in the licence | What it means |
|---|---|
| Competitive offering | A product offered to third parties on a paid basis, including through paid support arrangements, that significantly overlaps with IBM's paid versions of Terraform |
| Product | Software offered to end users to manage in their own environments, or offered as a service on a hosted basis |
| Embedded | Including Terraform's code in a competitive offering, or packaging an offering so Terraform must be accessed or downloaded for it to work |
| Internal use | Hosting or using Terraform for internal purposes within an organisation, which isn't a competitive offering |
Notice that paid support arrangements count. If your business packages Terraform itself as a paid hosted service that overlaps with IBM's, that's the case the licence is aimed at. Using Terraform as one of your own tools isn't.
Is HCP Terraform free?
Yes, there's a free plan. HashiCorp's developer documentation says HCP Terraform offers free, Essentials, Standard and Premium plans, and that teams getting started can use most features free, including remote execution, VCS integration, the private module registry, single sign-on, policy enforcement and run tasks. Free organisations are limited to 500 managed resources.
HashiCorp says the free plan supports individuals, small teams and organisations evaluating the product. Once you pass 500 resources, the paid plans are billed per managed resource.
HCP Terraform prices, as of October 2026
These are the starting prices on HashiCorp's pricing page, in US dollars, for eligible business customers.
| Plan | Starting price | Built for |
|---|---|---|
| Free | US$0 | Up to 500 managed resources |
| Essentials | From US$0.10 per month per resource | Individuals or teams adopting infrastructure as code |
| Standard | From US$0.47 per month per resource | Enterprises standardising automation |
| Premium | From US$0.99 per month per resource | Self-service workflows at scale |
HashiCorp also advertises a US$500 HCP trial credit on the paid plans. Plans and billing are managed per organisation, and one user can belong to several organisations on different plans.
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How to start with Terraform for free
- Download the Terraform CLI from HashiCorp and run it locally on your own machine.
- Store your state file somewhere safe, such as a versioned storage bucket, if you're not using HCP.
- If you want remote runs and a shared state, create a free HCP Terraform organisation.
- Keep an eye on the managed resource count, because 500 is the free plan's ceiling.
- If you build a product on Terraform, check the Additional Use Grant before you charge for it.
My verdict: is Terraform free for you?
For a business managing its own infrastructure, Terraform is free and the licence change doesn't stop you. The people who should read the licence are companies selling hosted infrastructure tools. If the BSL bothers you on principle, I've compared Terraform vs OpenTofu, and also Terraform vs Pulumi and Ansible vs Terraform.
Frequently asked questions
Is Terraform free for commercial use?
Yes. The Business Source License lets you make production use of Terraform as long as you don't offer it to third parties as a hosted or embedded product that competes with IBM's paid versions. Internal use isn't a competitive offering.
Can I build a free tool on top of Terraform?
Yes. The licence says products that aren't provided on a paid basis aren't competitive, and a product that isn't competitive when you launch it won't become competitive later because of a new IBM release.
Is Terraform open source?
Not for version 1.6.0 and later, which use the Business Source License. Each version moves to the Mozilla Public License 2.0 four years after it's published.
Does HCP Terraform have a free tier?
Yes. HashiCorp's docs say free organisations can use most HCP Terraform features and are limited to 500 managed resources.
How much does HCP Terraform cost?
As of October 2026 the pricing page shows Essentials from US$0.10, Standard from US$0.47 and Premium from US$0.99 per month per managed resource.
What happens when I go over 500 resources on HCP Terraform?
The free plan is limited to 500 managed resources. Beyond that you move to a paid plan such as Essentials, which HashiCorp bills pay-as-you-go by managed resource.
Who owns Terraform now?
The Terraform licence file names International Business Machines Corporation (IBM) as the licensor.
