How to Claim Your Heat Pump Tax Credit: IRS Form 5695 Step-by-Step Guide
If you installed a heat pump in 2025, you can claim up to $2,000 back on your federal taxes. Filing for this credit requires the right form, the right codes, and knowing exactly which lines to fill out. This guide walks you through the entire process.
What Is the Heat Pump Tax Credit?
- 30% of total installation cost (equipment + labor)
- Up to $2,000 maximum for heat pumps
- Non-refundable credit (reduces tax owed, but no refund beyond zero)
- Annual limit (you can claim it each year you make qualifying improvements)
What You’ll Need Before Filing
- Contractor invoice showing:
- Equipment make and model
- Installation date
- Itemized costs (equipment and labor)
- Manufacturer’s QMID (Qualified Manufacturer ID) For Trane Equipment: B8T9
- AHRI certificate (your contractor should provide this)
- Your Form 1040 (to determine your tax liability)
Step-by-Step: Filling Out IRS Form 5695
Form 5695 has two parts. For heat pumps, you’ll use Part II: Energy Efficient Home Improvement Credit.
Lines 24-28: Other Improvements (Skip if N/A)
These lines cover windows, doors, insulation, and home energy audits. Skip to line 29 if you only installed a heat pump.
Lines 29a-29h: Heat Pumps and Water Heaters
Line 29a: Enter your heat pump’s QM code and cost
- Format: QM code, then dollar amount
- Example: “I7Q6 $14,500”
Line 29b: If you installed multiple heat pumps, enter additional units here
Line 29c: Heat pump water heater QM code and cost (if applicable)
Line 29d: Additional heat pump water heaters (if applicable)
Line 29e-29f: Biomass stoves (skip if not applicable)
Line 29g: Add lines 29a through 29f together
Line 29h: Multiply line 29g by 30% (0.30). Maximum is $2,000.
Lines 30-32: Calculating Your Credit
Line 30: Add line 28 (other improvements) + line 29h (heat pump credit)
Line 31: Enter your tax liability from Form 1040, line 18
Line 32: Enter the smaller of line 30 or line 31. This is your actual credit.
Common Questions
Can I claim the credit if I got rebates?
Yes, but you may need to subtract certain rebates from your cost basis. State and utility rebates typically don’t reduce your credit, but be sure to consult a tax professional for your specific situation.
What if I installed the heat pump late in December?
As long as the installation was completed by December 31, 2025, you qualify. Keep your dated invoice as proof.
Do I need to itemize deductions?
No! The 25C credit is a tax credit, not a deduction. You can claim it even if you take the standard deduction.
What about the $3,200 annual cap I’ve seen mentioned?
The $3,200 cap is for ALL 25C improvements combined (windows, doors, insulation, heat pumps, etc.). Heat pumps alone are capped at $2,000 within that total.
Federal Tax Credits for HVAC
Under the Inflation Reduction Act of 2022, federal income tax credits for energy efficiency home improvements will be available through 2032. A broad selection of ENERGY STAR certified equipment is eligible for the tax credits. Taking advantage of tax credits, along with any available rebates, is a good way to help make the transition to a clean energy future more affordable.
Heat Pumps
Tax Credit: 30% of project cost up to $2,000
Expires: December 31, 2025
Details: This tax credit is effective for products purchased and installed between January 1, 2023 and December 31, 2025.
In general, all ducted heat pumps that have earned the ENERGY STAR label are eligible, as well as certified mini-split systems (non-ducted) with:
| Requirements | HSPF2 | EER2 | SEER2 |
|---|---|---|---|
| Ducted System (Trane) | >=7.8 | >=11.7 | >=15.2 |
| Mini Splits | >=9.5 | >=9 | >=16 |
Central Air Conditioners
Tax Credit: 30% of project cost up to $600
Expires: December 31, 2025
Details: This tax credit is effective for products purchased and installed between January 1, 2023 and December 31, 2025.
In general, all ducted heat pumps that have earned the ENERGY STAR label are eligible, as well as certified mini-split systems (non-ducted) with:
| Requirements | SEER2 |
|---|---|
| Split System (Trane) | >=15.2 |
| Packaged Systems | All ENERGY STAR Certified |
For additional information including customer requirements and/or to sign up, visit Energy Star. Clean heating and cooling.
