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2024 Federal Heat Pump Tax Credit: Everything You Need to Know

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If you’re considering a heat pump, the 2024 Federal Heat Pump Tax Credit can make it more affordable. This credit is part of the 25C Energy Efficient Home Improvement Credit, expanded under the Inflation Reduction Act. Homeowners can claim 30% of the cost, up to $2,000 per year, on qualifying heat pumps, heat pump water heaters, and related electrical upgrades.

This guide covers everything you need to know about how the federal heat pump tax credit works, who qualifies, and how to claim it.

What Is the Federal Tax Credit for Installing a Heat Pump?

The Federal Heat Pump Tax Credit is part of the 25C Energy Efficient Home Improvement Credit, expanded under the Inflation Reduction Act. It helps make energy-efficient upgrades more affordable by covering 30% of the total cost, up to $2,000 per year, for qualifying heat pumps and heat pump water heaters.

How It Works

This is a non-refundable tax credit, which means it directly reduces the amount of federal income tax you owe but won’t result in a refund. If the credit amount is more than what you owe, you can apply the excess credit to future tax years. This lets you maximize the benefit even if your tax liability is lower than the credit amount.

What’s Covered Under the 2024 Federal Heat Pump Tax Credit?

The 2024 Federal Heat Pump Tax Credit helps offset the cost of energy-efficient upgrades by covering a portion of your expenses. You can claim:

  • 30% of the total cost, up to $2,000 per year for air-source heat pumps and heat pump water heaters
  • $600 for electrical panel upgrades installed with a heat pump
  • $1,200 per year for other qualifying energy-efficient improvements, such as insulation and air sealing
For example, if you spend $7,000 on a qualifying heat pump installation, you can claim 30% of that cost, or $2,000, the annual cap. If you owe $3,000 in federal taxes, your tax bill would be reduced to $1,000 after applying the credit.

Heat Pump Federal Tax Credit Requirements

To be eligible for the 2024 Federal Heat Pump Tax Credit, you must meet the following requirements:

1. Property Requirements

  • The heat pump must be installed in an existing home and your primary residence in the U.S.
  • New construction and rental properties do not qualify.
  • Eligible properties include:
    • Single-family homes
    • Condominiums
    • Mobile homes and manufactured homes
    • Houseboats
    • Cooperative apartments

2. Efficiency Requirements

The heat pump must meet the highest efficiency standards set by the Consortium for Energy Efficiency (CEE), including:

  • A minimum SEER2 rating of 16 or higher
  • Compliance with the CEE’s highest efficiency tier for air-source heat pumps or heat pump water heaters

3. Business Use of Home

If you use part of your home for business, you can still claim the credit, but it will be prorated based on non-business use:

  • Up to 20% business use: You can claim the full credit
  • More than 20% business use: The credit is proportional to your non-business use

4. Timing and Installation Requirements

  • The heat pump must be installed and operational by December 31, 2024
  • You must claim the credit in the same tax year the installation is completed
Ready to Upgrade to a Heat Pump?Find out how energy-efficient heating and cooling can lower your energy bills. Learn more about Elephant Energy’s Heat Pump Solutions and see which high-efficiency system is right for your home.

How to Get Federal Tax Credit for Heat Pumps: Claim and Filing

Here’s how to get the federal tax credit for heat pump installations:

Step-by-Step Filing Guide:

  1. Collect Your Documentation:
    • Save your invoices and receipts showing the total cost of the heat pump installation.
    • Get a manufacturer certification statement to prove your system meets the required efficiency standards.
  1. Fill Out IRS Form 5695:
    • Fill Out Personal Information: Enter your Name, Social Security Number, and Main Home’s Address at the top of the form.
    • PART I: Residential Clean Energy Credit: This section is for solar, wind energy, geothermal heat pumps, or battery storage. Skip this if you’re only claiming the heat pump credit.
  • PART II: Energy Efficient Home Improvement Credit: This is where you’ll claim the heat pump tax credit, as well as credits for weatherization, electrical panel upgrades, and home energy audits.
    1. Continue filling out lines 17 through 32 in Part II.
      1. Section A: Qualified Energy Efficiency Improvements
        1. In Line 18, enter the total invoice amount for insulation and air sealing.
      2. Section B: Residential Energy Property Expenditures
        1. In Line 25ab, enter the total invoice amount for electrical panel upgrades.
        2. In Line 29abc, enter the total invoice amount for heat pumps and/or heat pump water heaters.
  1. Integration with Form 1040:
    • Add the relevant tax credit details from Form 5695 to your standard Form 1040 when filing your federal taxes. This ensures the credit is accurately applied to your tax bill.
  1. Submission Reminder:
    • Attach Form 5695 to your federal tax return (Form 1040) when filing. This is required to claim the credit.
  1. Keep Your Records:
    • Hold onto all documentation, including invoices and certification statements, for at least three years in case of an IRS audit.

Additional Energy Efficiency Tax Credits

In addition to the heat pump tax credit, the 25C Energy Efficient Home Improvement Credit covers other energy efficiency upgrades. Pairing these improvements with a heat pump installation helps you maximize your savings while enhancing your home’s overall energy efficiency.

Home Energy Audits

You can also get a tax credit of up to $150 for a home energy audit conducted on your primary residence. To qualify, the audit must:

  • Include a written report and inspection that identifies the most significant and cost-effective energy efficiency improvements, along with estimates of potential energy and cost savings.
  • Be conducted by a certified home energy auditor to ensure accuracy and credibility.

Pairing a home energy audit with a heat pump installation helps you identify additional energy-saving opportunities, maximizing your overall savings.

Energy Efficiency Upgrades

The 2024 Federal Heat Pump Tax Credit is part of the 25C Energy Efficient Home Improvement Credit, which also covers other energy efficiency upgrades. You can claim 30% of the project cost, up to $1,200 per year, for qualifying improvements, including:

  • Attic Insulation
  • Basement or Crawlspace Insulation

Pairing these upgrades with a heat pump installation helps you maximize your savings while improving your home’s overall energy efficiency.

Need More Details on Filing?

For more detailed instructions, check out:

Ready to Upgrade Your Home’s Comfort and Efficiency?
Start your journey to lower energy bills and a more comfortable home. Get an Instant Quote for Heat Pump Installation from Elephant Energy and see how much you could save with a high-efficiency system.

Additional Resources: Rebates and Tax Credits Directory

Looking to maximize your savings? The following will take you to relevant Elephant Energy resources that explain how to make the most of available financial incentives, including rebates and tax credits:

Why Choose Elephant Energy?

Upgrading to a heat pump is a smart way to lower your energy bills, reduce your carbon footprint, and take advantage of the 2024 Federal Heat Pump Tax Credit. With the right system, you can get money back at tax time while making your home more comfortable and energy-efficient.

Elephant Energy makes the process simple and stress-free. Our team handles every detail, from helping you choose the right heat pump to guiding you through every rebate and tax credit available. 

Ready to maximize your savings? Get an instant estimate to upgrade your home and invest in a more sustainable future.

Frequently Asked Questions

Can I combine this tax credit with other incentives?

Yes, you can combine the federal tax credit with state rebates or utility incentives. The federal credit is calculated based on your out-of-pocket costs after other rebates are applied, letting you maximize your savings.

Can I claim this credit if I received a state rebate?

Yes, but the federal tax credit will be calculated on your costs after the state rebate is applied. This means you’ll get credit for what you actually spent out of pocket.

Do rental properties qualify if I live there part-time?

No, rental properties do not qualify, even if you live there part-time. To get this credit, the heat pump must be installed in your primary residence.

What if I don’t owe enough in taxes to use the full credit this year?

This is a non-refundable credit, so it can only reduce your tax bill to zero, not below. However, you can use your unused credit for future tax years to make the most of the credit.

Disclaimer:

This guide is for informational purposes only and should not be considered tax advice. Individual tax situations can vary, so it’s recommended to consult a licensed tax professional for personalized guidance. Elephant Energy does not assume liability for your specific tax circumstances.

New Year, New Heat Pump: Don’t Wait to Take Climate Action in 2024

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Congratulations on surviving the holidays with your in-laws and diving head first into your New Year’s resolutions! Is upgrading to a climate-friendly home on that list? Here’s a friendly yet firm nudge: 2024 is not just another year, it’s a crucial time to consider upgrading to a heat pump or heat pump water heater.

Why the rush? Well, it’s not only about enjoying a cozier home and smarter savings on your bills. We’re racing against time for the planet. The clock is ticking towards 2030, a year earmarked by experts as critical for reducing global carbon emissions. Every heat pump installed is a step towards that goal. Sticking with that old furnace or unreliable water heater? That’s not just a hassle waiting to happen; it’s a missed opportunity to join the fight against climate change.

So, why not kick off the year by making your home more efficient and comfortable? What’s the best time of year to buy a heat pump? Don’t wait – the time is now!

1. Accelerating the Tipping Point: Every Installation Counts

What is the future of heat pumps? Well, we are approaching a critical tipping point in heat pump adoption. Every installation is a significant contribution, providing essential social proof that accelerates the transition to green energy. By installing a heat pump now, you’re not only taking a personal stand against climate change but also inspiring confidence in others to join this growing movement. Your action today is a powerful catalyst in this critical journey.

2. The Slow Rebate Rollout: A Call to Act Now

While the Inflation Reduction Act offers the promise of direct-pay rebates, its slow implementation—with only a few states expected to roll out rebates this year—suggests that waiting may not be the best strategy. If you’re in a position to install a heat pump without relying on these incentives, it’s prudent to proceed. Waiting could mean missing out on immediate benefits and potentially facing uncertainties regarding rebate qualifications.

3. A Singular Opportunity for Long-Term Impact

Choosing your next HVAC system is a once in every two decades decision. Opting for a heat pump now avoids the risk of being forced to select a less sustainable option in an emergency. A proactive choice today ensures that you are not contributing to another two decades of emissions. At what age should a heat pump be replaced? When well-kept, you can expect 15+ years out of your heat pump.

4. Stay Ahead of the Demand Curve

Demand for heat pumps is expected to surge, especially once rebates do become more widely available. As we’ve seen happen before, this increase in demand will likely lead to higher prices and longer installation wait times. By acting now, you avoid these pitfalls, start saving on energy costs immediately, and contribute to stabilizing market demand.

5. Influence Your Community: Share Your Climate Journey

Installing a heat pump gives you a unique opportunity to influence your community. Rather than boasting, use this chance to share your experience upgrading to a climate-friendly home. Your story can (and will!) inspire others to make similar choices, creating a ripple effect of positive environmental impact. Send us an email at hello@elephantenergy.com – we’d love to share your story.

Conclusion: The Time to Act is Now

In 2024, the message is clear: waiting comes with a cost, too. Installing a heat pump is a critical step towards a sustainable future. It’s a decision that benefits you, your community, and the planet. If you’re able to install a heat pump this year, don’t wait for a ‘better time’ or more incentives – the time to act is now.

Ready to get started? Join us in building a brighter future by electrifying everything, starting with homes. Your choice today shapes our collective tomorrow!

Resource Roundup for Your Climate-Friendly Home Journey

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WHEW, we made it. The home stretch, the last chapter, the grand finale—whatever you want to call it. It’s our seventh and final post in our climate-friendly home series. In this final edition, we’re sharing a roundup of all our favorite resources to help make your climate-friendly journey as simple as possible. Read on for a whole host of helpful guides, databases, toolkits, and more—and drop us a line if you think there’s something we should add. 

Guides to Climate-Friendly Home Upgrades:  

All Things Solar: 

Incentives & Rebates 

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Still looking for a resource to help you determine where to start your climate-friendly home journey? Look no further than Elephant’s tool, Your Electrification Roadmap®. By answering some simple questions and providing a few key details about your goals and preferences, you can get a personalized plan to simplify your journey to home electrification. 

Incentives Better than Ever for Your Climate-Friendly Home

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Over the past few weeks, we’ve been digging into all the pieces that go into making your place as climate-friendly as possible: from the appliances and systems you install, to the type(s) of energy you use, to the importance of maximizing efficiency and taking care of your stuff so it lasts.

We’re going to go out on a limb and guess that, at some point in your reading, the question of cost has crossed (or perhaps even consumed) your mind. And whether you’re in the camp of “hmm, seems expensive. I’m not sure how I’d swing it,” or “pssh, in my DREAMS. Someone’s gotta pay for this, and I can’t do it,” hang tight. We’ve got you covered. Let’s dig into all the incentives available to help make these solutions more affordable and accessible than ever. 

Federal Incentives 

Inflation Reduction Act (IRA) 

Passed in August 2022, the Inflation Reduction Act was the most significant investment in greenhouse gas reductions ever in the US. It offers both tax credits and rebates to homeowners looking to make their spaces more energy-efficient and climate-friendly. Here are just a few of the ways you can save now: 

  • Rooftop solar and battery storage tax credits (30% of total project cost, up to $2000 max credit) Climate-friendly home incentives from Elephant Energy
  • Heat pump tax credit (up to $8000, depending on income) 
  • Heat pump water heater tax credit (up to $2000) 
  • Weatherization/energy efficiency tax credit (up to $1,200) 

If you’re looking for a handy tool to see how much your home, specifically, could save through IRA incentives, check out Rewiring America’s great IRA calculator. 

Additionally, states can apply for funding for direct-pay rebates (HEEHRA rebates) that will provide an upfront, point-of-sale reduction to your project. We’re still waiting for more details on the timing of these rebates—stay tuned by signing up for our newsletter (find the form in the footer of our homepage). 

Psst—Learn more about making the most of IRA incentives right here. 

State and Local Incentives 

Sorry to go all 1 AM infomercial on ya, but that’s not all, folks! Read on, if you’re in CO or MA:

Turns out there are plenty of local and state-specific incentives in addition to the aforementioned federal ones. For instance, Coloradoans can take advantage of a state tax credit and sales tax exemption on heat pumps, heat pump water heaters, and certain energy storage systems. And Massachusetts residents can save significantly on climate-friendly home upgrades through the Mass Save® rebates program. There’s a ton of variation between different states, counties, and even local utility companies—and, in our final edition of this series, we’ll be sharing a whole host of resources to help you find and take advantage of those programs. 

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Forgotten where to start? Learn more about the electrification upgrades that will make the most impact in your specific home with our free tool, Your Electrification Roadmap®. Answer a few quick questions, and we’ll give you a plan designed to meet your distinct needs. 

Rule 3: Be Efficient (Part 2)

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Hello. Welcome back to our climate-friendly home series. We’re stoked you’re here. If you’re new to the party, here’s what we’ve covered thus far: 

  1. The basics of a climate-friendly home 
  2. Rule 1: Don’t burn stuff 
  3. Rule 2: Don’t use energy made from burning stuff 
  4. Rule 3: Be efficient. 

Today, we’re digging deeper into rule 3. Where our last edition focused on the importance of energy audits and weatherization, this post is all about making sure your systems are running the way they are supposed to run, AND that you aren’t replacing things all the time. 

Embracing this rule comes with lots of perks: It can help ensure you aren’t stuck with a broken heating system when the in-laws are visiting over the holidays (yikes), prevent an unforeseen trip to the local appliance store on what was supposed to be a spectacular ski weekend (eek), and make your place a climate-friendly haven (yay!). Want to learn more? Let’s get into it. 

Why It’s Important to Make Things Last

Take care of you heat pump and other energy-efficient appliancesTo understand why “making it last” is so critical for efficiency, we first need to do a teeny science lesson on something called embodied energy.  

Let’s say you buy a new fridge. It’s a rad new fridge with a computer that tells you when to buy new milk. As the most efficient fridge of its size, it will use 10% less energy than your old fridge. This is cool. (See what we did there?)

That fridge is made of parts and materials that took energy to make.
It took energy to put it on a boat and get it across the ocean to a warehouse.
It took energy to get it delivered to the store where you bought it, and more energy to get it to you and get it installed.

All that energy tied up in making that fridge and getting it to you? That’s embodied energy. And while that feels like a lot, the reality is that, over time, your energy-efficient fridge is going to “pay for” that embodied energy by SAVING lots of energy each year. So getting that new one IS better for the planet…in the long run.

But what if you have to buy a new one every 5 years? Does it “pay for” itself then? Nope. That’s why, beyond saving yourself the extra expense of having to replace appliances more often than necessary, making things last is a crucial component of a climate-friendly home. 

So, How Do We “Make It Last”? 

In short: We’ve gotta take care of our stuff. We’ve got to do our required yearly maintenance, as well as recommended preventative maintenance. 

This means we need to vacuum the fridge coils. Change the filters on our heat pumps. Keep our induction stovetops nice and clean. Regularly flush our heat pump water heaters. Doing this maintenance ensures our system doesn’t have to work extra hard (i.e., inefficiently) because the filter is super dirty or other maintenance hasn’t been performed. 

If keeping our systems maintained gives us an additional couple of years of life for our systems and appliances, that might mean that we buy one whole fridge fewer over our lifetime (in other words—BIG embodied and pocketbook energy savings). 

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If you’re in an Elephant Energy coverage area (Colorado and Massachusetts, and more to come), give us a shout to learn about our maintenance packages that’ll keep your climate-friendly upgrades in tip-top shape. And if we aren’t in your area yet, ask your installation specialists when you make these home upgrades to see what they offer by way of keeping your systems singing year after year.

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