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As homeowners seek more energy-efficient solutions for heating and cooling, heat pumps have become increasingly popular. Not only do they offer efficient climate control in your home, they can lead to significant cost savings over time. To incentivize the adoption of these eco-friendly systems, the federal government offers tax credits for qualifying heat pumps, and heat pump water heaters.

Tax Credits for Heat Pumps:

Homeowners who install a qualifying air-source heat pump can claim a federal tax credit for 30% of the total project cost, up to $2,000! To be eligible for the credit, the heat pump must meet certain efficiency requirements, which are measured by the Seasonal Energy Efficiency Ratio (SEER) and Heating Seasonal Performance Factor (HSPF). The higher the SEER and HSPF ratings, the more efficient the heat pump, making it more likely to qualify for the tax credit.

Tax Credits for Heat Pump Water Heaters:

Heat pump water heaters are another energy-efficient option for homeowners looking to reduce their carbon footprint and energy bills. These systems work by extracting heat from the air to heat water, using significantly less electricity than traditional water heaters.

Homeowners who install a qualifying heat pump water heater can receive a federal tax credit of up to $2,000 annually (30% of total project costs). Similar to air-source heat pumps, the efficiency of the heat pump water heater is measured by its energy factor (EF). The higher the EF, the more efficient the water heater, increasing the likelihood of qualifying for the tax credit.

Depending on your tax situation, you could qualify for the following 25C Federal Tax Credits:

  • Up to $600 for a qualifying standalone air conditioner installation or furnace installation
  • Up to $1,200 for a qualifying air conditioner/furnace combo
  • Up to $2,000 for a qualifying heat pump (air-source heat pump or ductless mini-split)
  • Up to $2,600 for a qualifying ducted air-source heat pump and furnace combo

Additional resources on tax credits for heat pumps:

Heat Pump Tax Credit Process:

To claim the federal tax credits for heat pumps and heat pump water heaters, homeowners should follow these steps:

  1. Purchase and Install a Qualifying System: Ensure that the heat pump or heat pump water heater you are installing meets the efficiency requirements outlined by the federal government. Consult with your HVAC professional to confirm eligibility.
  2. Keep Documentation: Save all receipts and documentation related to the purchase and installation of your qualifying system. This includes invoices, product certifications, and any other relevant paperwork.
  3. Claim the Credit on Your Taxes: When filing your federal taxes, use IRS Form 5695 (Residential Energy Credits) to claim the tax credit for your heat pump or heat pump water heater. Include the total cost of the system and any installation costs.
  4. Consult with a Tax Professional: It’s always a good idea to consult with a tax professional or accountant when claiming tax credits to ensure you are following the correct procedures and maximizing your potential savings.


Please Note: Metro Heating & Cooling can help you determine which equipment qualifies for the Federal Tax Credit program, but customers must consult their tax professional about personal qualifications for tax credits. The information in this article is for informational purposes only and is not intended to be accounting or tax preparation advice.

By taking advantage of these federal tax credits, homeowners can not only enjoy the benefits of energy-efficient heating and cooling but also save money in the process. Investing in a qualifying heat pump or heat pump water heater is not only a smart choice for the environment but also for your wallet.

Schedule a HVAC repair anywhere in the Minneapolis or St. Paul area today by calling (651) 294-7798 or by requesting an estimate online.


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