Equipment requirements

To qualify for the tax incentive, the heat pump you install must be certified by AHRI and meet the specifications established by the Consortium for Energy Efficiency. When choosing an installer, ask them to specify if the equipment they're quoting qualifies.

How the tax credit works

If your heat pump meets those criteria, you can claim 30% of the equipment and installation cost – up to $2,000 – off your federal taxes.

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.

This credit resets every year, so if your home needs multiple heat pumps (for example, one system for your upstairs and another one for your downstairs), you can maximize the credit by doing it over two years.

Additionally, the $2,000 limit applies to both a heat pump and a heat pump water heater. So, if you're considering doing both projects, you may want to space them out over two years. Because the credit resets every year, you can claim 30% up to $2,000 each year.

You can read more about how tax credits work.

How to claim the tax credit

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