Heat Pump Incentives: Save Big on Clean HVAC

As of January 1, 2023, if you install a new air-source heat pump in your primary residence, and it meets certain efficiency requirements, you'll be eligible for a federal tax credit of up to $2,000, or 30% of the installation cost, whichever is less. Nice! (Ground-source / geothermal heat pumps are covered under a different tax credit.)

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So, if you add a new heat pump in November 2024, you'll claim the credit when you file your tax returns in early 2025. It's officially known as the 25C Energy Efficient Home Improvement Credit, and you use IRS Form 5695 for the claim. Tax-prep software like TurboTax might be able to guide you toward the right steps as well, as they've previously done with credits for electric vehicles and solar panels.

Small mini-splits count, too

Single-zone or partial-home mini-split heat pumps are eligible for the heat pump credit, as long as the equipment meets efficiency requirements. Again, it does not need to be a whole-house heat pump. Even a small ductless mini-split heat pump you'll mostly use for cooling can be eligible. 

Rebate examples

• If you spend at least $6,667 on your qualified heat pump installation (which is at the low end of what a whole-house system costs), you can claim the full $2,000 credit.

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• If you spend less than that amount, you'll multiply the amount you paid by 0.3 — and that's how much you can claim. For example, say you paid $3,500 for a one-zone mini split. $3,500 x 0.3 = a $1,050 tax credit.

Which heat pumps are eligible for the tax credit?

To qualify for the federal tax credit, your heat pump needs to meet some efficiency requirements. They're not too stringent, and it looks like a nice long list of models will meet all the criteria.

Eligible heat pumps need to meet requirements set by the Consortium for Energy Efficiency (CEE), a nonprofit organization that develops efficiency standards and programs across loads of product categories. The required specs are published here and vary by the type of heat pump and the region (north or south, look up your state here). In every case, the efficiency requirements are more stringent than the minimums set by the Department of Energy.

Required specs, South region:

For more information, please visit Commercial Air Source Heat Pump.