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.
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 reduce by the amount of the credit. It is available for new heat pumps and heat pump water heaters (HPWH) in your primary residence, whether you rent or own the property, 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.
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.
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):
- 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
Please contact your tax preparer if you have questions about claiming these credits.