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Maximizing the Inflation Reduction Act tax credit

How to get the most money in tax credits for heat pumps and heat pump water heaters

Vicky Volvovski
November 1, 2023

The Inflation Reduction Act tax credits allows you to claim 30% of cost – up to $2,000 – on your federal taxes for heat pumps and heat pump water heaters every year. 

If you're considering installing both a heat pump and heat pump water heater, you may want to space them out over two years. That way, you can claim the tax credit multiple times. 

Similarly, if you’re considering installing multiple heat pumps (for example, one system for your upstairs and another one for your downstairs), you can also maximize the credit by doing it over two years.

Note: If your federal tax liability is less than the credit amount, you only claim the amount you owe. For example, if the heat pump costs $10,000, you can claim the full $2,000. However, if you only owe $1,000 in federal taxes, you can only claim $1,000.

To claim the tax credit, you'll fill out Form 5695 with your federal taxes.

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