The federal government has a tax credit for qualifying heat pump installations.

Please read through the info on this page to see if you have the system that qualifies for the $2000 Tax Credit for 2023 taxes.

If you make qualified energy-efficient improvements to your home after Jan. 1, 2023, you may qualify for a tax credit up to $3,200. You can claim the credit for improvements made through 2032.

For improvements installed in 2022 or earlier:  Use previous versions of Form 5695.

Beginning Jan. 1, 2023, the credit equals 30% of certain qualified expenses, including:

There are limits on the allowable annual credit and on the amount of credit for certain types of qualified expenses. The credit is allowed for qualifying property placed in service on or after Jan. 1, 2023, and before Jan. 1, 2033.

The maximum credit you can claim each year is:

The credit has no lifetime dollar limit. You can claim the maximum annual credit every year that you make eligible improvements until 2033. 

The credit is nonrefundable, so you can’t get back more on the credit than you owe in taxes. You can’t apply any excess credit to future tax years.

You may claim the energy efficient home improvement credit for improvements to your main home. Your main home is generally where you live most of the time.

For the energy efficiency home improvement credit, the home must be:

In most cases, the home must be your primary residence (where you live the majority of the year). You can’t claim the credit if you’re a landlord or other property owner who doesn’t live in the home.

If you use a property solely for business purposes, you can’t claim the credit.

If you use your home partly for business, the credit for eligible clean energy expenses is as follows:

Frequently asked questions about energy efficient home improvements and residential clean energy property credits

To qualify, home improvements must meet energy efficiency standards. They must be new systems and materials, not used. Some improvements have specific credit limits as follows.

To qualify, building envelope components must have an expected lifespan of at least 5 years. Qualified components include new:

Labor costs for installing building envelope components don’t qualify for the credit. 

A home energy audit for your main home may qualify for a tax credit of up to $150.

In order to qualify, the home energy audit must:

Starting in 2024, the following additional requirements must be met:

We recommend home energy auditors apply for and receive an EIN if they do not already have one. Apply for an EIN Online.

For more information, see Notice 2023-59 PDF.

Residential energy property

Residential energy property that meets the Consortium for Energy Efficiency (CEE) highest efficiency tier, not including any advanced tier, in effect at the beginning of the year when the property is installed qualifies for a credit up to $600 per item. Costs may include labor for installation.

Qualified property includes new:

Oil furnaces or hot water boilers can also qualify through other efficiency criteria.

Costs of electrical components needed to support residential energy property, including panelboards, sub-panelboards, branch circuits, and feeders, also qualify for the credit if they meet the National Electric Code and have a capacity of 200 amps or more. There is a limit of $600 per item.

Heat pumps and biomass stoves and boilers

Heat pumps and biomass stoves and boilers with a thermal efficiency rating of at least 75% qualify for a credit up to $2,000 per year. Costs may include labor for installation.

Qualified improvements include new:

Subsidies, rebates and incentives

When calculating your credit, you may need to subtract subsidies, rebates, or other financial incentives from your qualified property expenses because they’re considered a purchase price adjustment.

Public utility subsidies for buying or installing clean energy property are subtracted from qualified expenses. This is true whether the subsidy comes directly to you or to a contractor on your behalf. However, utility payments for clean energy you sell back to the grid, such as net metering credits, don’t affect your qualified expenses.

Rebates are subtracted from qualified expenses if all of these apply:

State energy efficiency incentives are generally not subtracted from qualified costs unless they qualify as a rebate or purchase-price adjustment under federal income tax law. Many states label energy efficiency incentives as rebates even though they don’t qualify under that definition. Those incentives could be included in your gross income for federal income tax purposes. See Notice 2013-70, IRB 2013-47.

How to claim the Energy Efficient Home Improvement Credit

File Form 5695, Residential Energy Credits Part II, with your tax return to claim the credit. You must claim the credit for the tax year when the property is installed, not merely purchased.