How do I claim the Federal tax credit for my HVAC heat pump, heat pump water heater, insulation, electrical work, new windows, etc?
Most new heat pump and heat pump water heater installations qualify for a federal tax credit of 30% of the project cost, up to $2,000.
May 2025 update: Take advantage of these credits while they're available! The Trump administration seems likely to reduce or even repeal the Inflation Reduction Act, which funds these tax credits - but those changes may not take effect until the 2026 tax year. Get your clean energy upgrades done in 2025 so you can get these tax credits!
When you file your federal taxes, you may be able to claim a tax credit of 30% of the project cost, after other rebates and incentives, up to $2,000. This means your total tax owed will be reduced by the amount of the credit. This particular credit available for new heat pumps and heat pump water heaters (HPWH) in your residence, whether you rent or own the property, or whether it is a primary residence or second home, but is not available for landlords, investment properties, or new construction.
The credit is limited to $2,000 in each tax year which, in most cases, means it will apply to a heat pump or a heat pump water heater. It resets with each tax year, so you can claim it again on other projects in subsequent years.
You must have tax liability for the credit to offset; if you have no tax liability, then the credit won't be helpful to you. You cannot roll the credit forward to offset tax liability in a future year.
To claim the credit, include the project expense on Part II of Form 5695 of your tax return. When in doubt, provide all invoices for clean energy work to your tax preparer. For 2025 filings, you will need to provide a Product Identification Number for relevant materials and equipment.
You may also use Part II of Form 5695 to claim up to $1,200 total in credits for other electrification-related projects (please see the instructions for limits, qualifications, and other details, including that these may only be installed in a primary residence):
- Insulation and air sealing
- Electrical sub-panel installation to support a heat pump or heat pump water heater
- Home energy audit
- Exterior doors and windows
Your QuitCarbon Home Insights will show you which credits apply for which upgrades in your home - and all the other rebates and incentives available to you.
Please contact your tax preparer if you have detailed questions about claiming these credits.
Want free guidance on upgrading your home? QuitCarbon provides free ENERGY STAR® certified guidance along with vetted local contractors to upgrade your home with heat pumps, induction cooking, EV chargers, solar, batteries, and more. Click here to get started.