Upgrading your home’s heating and cooling or hot water heater is a big investment, and many Long Island homeowners already know they could be saving money, energy, and making their homes more comfortable by replacing their aging and inefficient systems.
Luckily, there’s a great incentive available that makes energy-efficient electric heat pump upgrades and hot water water installation more affordable: a 30% federal tax credit worth as much as $2,000! But tax credits are a little different than rebates, so here’s a secret: the best time to take advantage of a tax credit is right before the end of the year! Let’s explain why.
What Is the Heat Pump Tax Credit?
The heat pump tax credit is part of a revamped home improvement tax credit in the US tax code, sometimes known as the 25C tax credit. This incentive was overhauled as part of the Inflation Reduction Act in 2022, and 2023 was the first year that it’s been in effect with new and improved benefits.
The Energy Efficient Home Improvement Credit, as it’s now called, offers a tax credit for a number of energy-saving home upgrades. The specifics change depending on the upgrade, but the deal on heat pumps and heat pump water heaters is the best.
This federal tax credit is equal to 30% of your costs to upgrade to a ducted heat pump, ductless mini-split, or heat pump water heater. There is a maximum combined annual limit of $2,000 for any upgrades in this category.
How Does a Tax Credit Work?
Tax credits are a type of incentive, just like rebates, but they work a bit differently. With rebates, you either receive a check in the mail after you’ve qualified and had the work performed, or you get an instant rebate and the amount is taken off your invoice from the contractor.
But a tax credit lets you deduct the amount of the credit from your taxes due (in this case, your federal taxes) for the year or period in which you made the qualifying upgrade. As long as you owe as much or more in federal taxes than the amount of the credit you qualify for, you can fill out IRS Form 5695 when you file your taxes to claim your credit.*
*At Home Efficiency Experts, we’re heat pump installers, not tax professionals. We have a tax expert handle and review our taxes for accuracy, and strongly encourage you to do the same!
What’s the Rush in Installing a Heat Pump by the End of the Year?
Because most people file their taxes once a year, in March or April, there’s a pretty wide range of time that you could potentially have to wait before you see the savings from your heat pump or heat pump water heater tax credit.
For example, if you install your new heat pump or water heater between now and the end of the year, you’ll only have to wait until you file your taxes next spring to see your savings. But if you wait until February and decide to schedule your new equipment installation then, you’ll have to wait more than a year to get your money back in the form of reduced federal taxes dues, until you file your 2024 taxes in Spring of 2025.
Everyone’s different, but here at Home Efficiency Experts, we think you’ll much prefer the former option!
Bonus Savings! Get a $500 Bonus, But Only with Home Efficiency Experts
The federal heat pump tax credit is available to anyone, but Home Efficiency Experts is sweetening the offer with an additional limited time bonus of $500 on any heat pump or ductless mini-split installation. We can’t guarantee this deal will be around forever, so take advantage of your tax credits now and get a little something extra this fall when you call our team of Long Island home comfort and energy efficiency experts.
