Heat Pump Tax Credits

Types of Heat Pump Tax Credits

Three different heat pump tax credits are current available in the United States.

Tax Section 25C, Nonbusiness Energy Property Credit

To help combat inflation, the U.S. Government passed the Inflation Reduction Act of 2022. This act includes several tax credits for the installation of ENERGY STAR^® certified home heating and cooling products. Tax Section 25C, Nonbusiness Energy Property Credit, provides a tax credit to homeowners equal to 30% of installation costs for the highest efficiency tier products, up to a maximum of $2,000 for qualified heat pumps. The below chart shows details of the credit.

Tax Section 25D, Residential Energy Efficient Property

Provides a tax credit to homeowners equal to 30% of installation costs for ENERGY STAR^® geothermal heat pumps until 2032. That percentage drops to 26% in 2033 and 22% in 2034.

High-Efficiency Electric Home Rebate Program

Provides income-depending rebates to eligible homeowners including up to $8,000 for all-electric heat pumps.

Qualifying for Heat Pump Tax Credits

To qualify for the heat pump tax credit, certain criteria must be met. The heat pump must be installed in your primary residence and meet federal efficiency requirements. These standards ensure that the heat pump you choose is energy-efficient and environmentally friendly.

When claiming the tax credit, you'll need to provide documentation to support your claim. This includes invoices or receipts for the purchase and installation of the heat pump, as well as certifications or product specifications demonstrating its energy efficiency. Keeping these documents organized and accessible is crucial for when you file your taxes.

Calculating the tax credit amount can be complex, as it depends on factors like the type of heat pump and its efficiency rating. The credit is typically a percentage of the total cost of the heat pump, up to a maximum amount.

How to Claim the Heat Pump Tax Credit

Here’s a step-by-step guide to help you claim your heat pump tax credit:

• Step 1: Determine Your Eligibility - Ensure you meet the eligibility criteria. Verify that your heat pump meets the energy efficiency requirements and check if you qualify based on your income level (not required for 25C or 25D credits)
• Step 2: Gather Necessary Documentation - Collect all receipts, invoices, and manufacturer certifications as proof of purchase and eligibility.
• Step 3: Complete IRS Form 5695 - This form is specifically for claiming the residential energy-efficient property credit. Fill it out accurately, ensuring all information is correct and up-to-date.
• Step 4: Submit Your Tax Return - Include Form 5695 when filing your federal tax return. Be mindful of the filing deadline to avoid missing out on the tax credit. Also, check your state’s tax regulations, as the heat pump tax credit may be available at the state level as well.

The heat pump tax credit must be claimed on your federal tax return for the corresponding tax year. The typical filing deadline is April 15th, but always verify with the IRS or consult a tax professional for any changes to the deadline.

Local Utility Rebates

In addition to Federal Tax credits, local utility rebates may be available on certain heat pumps as well. Explore our Rebates page to discover local rebates in your area or our heat pumps page to see rebate amount by model.

Connect With Your Local Carrier Dealer

At Carrier, we offer a variety of energy-efficient heat pumps that qualify for heat pump tax credits. Our heat pumps are designed with advanced technology to provide reliable heating and cooling while minimizing energy consumption. Contact your local Carrier dealer today to learn more about our heat pump options and how they can help you save on both energy costs and taxes.

By exploring these heat pump tax credits, you can make the most of your energy-efficient home improvements and save money in the process. Remember to consult with a tax professional for guidance specific to your situation and to ensure compliance with all relevant tax laws and regulations.