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Understanding tax incentives for heat pump water heaters

How to make sure your heat pump water heater qualifies for the federal tax incentive

Vicky Volvovski
June 4, 2024
Heat pump water heater in a garage

To qualify for the tax incentive, a heat pump water heater must be ENERGY STAR certified.

If your heat pump water heater meets this 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 water heater costs $3,000, you can claim $900. However, if you only owe $500 in federal taxes, you can only claim $500. Unfortunately, the credit does not roll over.

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.

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

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