Clean Energy Tax Credits (US) for Heat Pump and A/C

[simonsez]

We put in a new HVAC system in 2024 that includes a heat pump as well as an efficient enough A/C unit that would both qualify for existing credits.

https://www.energy.gov/policy/articles/making-our-homes-more-efficient-clean-energy-tax-credits-consumers
https://www.irs.gov/credits-deductions/home-energy-tax-credits

However, the company who installed it only gave me a receipt for the entire thing instead of breaking down the components.  I called and asked for a breakdown and only received vague answers or just outright strange tax advice instead of an itemized list ("Yeah they should qualify" or "Just put down the whole price on the heat pump AND for the A/C").

Heat pumps can get up to a $2000 credit on 30% of the cost.  So if a heat pump cost $6667 or more, it would qualify for the full $2000.

Efficient central air units qualify for an independent $600 credit on 30% of that specific cost.  So an efficient central air unit that cost $2000 or more would qualify for the full $600.

My question when filling out Form 5695 and the corresponding Schedule 3 - since the install company is not being much help with an itemized receipt - is it reasonable that for a $14550 total HVAC cost (whole system) that the heat pump portion would be at least $6667 and that the central air portion would be at least $2000?

I'm tempted to put down like $8000 for the heat pump portion and $2500 for the central air portion and call it a day.  Just, ya know, not trying to commit fraud or anything as I think I should qualify for the max on both credits but am not 100% on how to break this down since I can't get an itemized receipt.

[shingy]

So, if I understand correctly, you got a heat pump for heat (presumably replaced gas) and a new conventional a/c for cooling and the total was $14.5k.

I couple years ago, I did a straight conventional a/c to heat pump replacement and the cost was $9,000. Based on other quotes I received, that was a really good deal. At the time heat pumps were a bit more expensive then conventional by $1-2k. So, I can't see how the heat pump portion wouldn't be at least $6,667 and likewise for the a/c component being at least $2k.

[simonsez]

Pretty much. There is still a furnace that burns gas (a new one, though) when the temp drops below a certain point and kicks over from heat pump to that.

The cost is roughly A/C + Heat pump + furnace = 14.5k.

I think whatever amounts I use, I'll write a note in my tax documentation in case I'm ever audited to show they are reasonable figures . I'm not trying to get away with anything shady, just want to qualify for the credits even though I don't have the itemized breakdown.

Thanks for the feedback!

[uniwelder]

I get the feeling you only qualify for one tax credit.  Normally a heat pump provides heating and cooling to the home.  There isn't a separate unit for air conditioning (cooling).  How many outdoor units do you have?  Probably only one.  This is probably why the hvac contractor won't break down the quote--- its not that they're being unhelpful, its that there is no way to separate A/C from heat pump, and they think you're trying to game the system.

My understanding when I read the IRS guidelines, is that if you have only an air conditioner installed (cooling capability only), then you qualify for the $600.  If you have a heat pump (sounds like this is what you have, can do heating and cooling) then you can get the $2,000. 

[simonsez]

Hm okay, I read it as they are separate. On the energy.gov link, everything with a single asterisk can only add up to $1200 in credits. This $1200 limit includes efficient windows, A/C, doors, energy audits, and a few other things.

Additional link stating they're separate:
https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit

I did purchase a good sized window in 2024 but it does not count as an efficient one (even though I personally think it's a nice window that is a massive upgrade over the old drafty single pane, it doesn't have the star energy logo) and thus I can only get up to $600 for the efficient A/C.

The IRS link says that heat pumps (and biomass stoves and boilers) count for up to $2000 separately (and on the initial energy.gov link, do NOT have the single asterisk, further reinforcing that it seems like a separate credit). Thus it seems like $3200 would be the max under the Energy Efficient Home Improvement Credit that a person could do in a single year even though I personally only might be able to get $2600.

I get what you're saying about the difficulty in breaking down the components. Maybe you're correct and $2000 is all I qualify for. I'll have to read more.

When I called the heating and cooling company, it was late on a Friday and they seemed in a hurry to get their weekend jumpstarted. I don't think it really affects their bottom line how I file my taxes and how many credits I claim, but I could be wrong on that. They certainly weren't unhelpful. I might try them again earlier in the week and before lunch.

Note to anyone else who purchased energy efficient stuff for their house (or will through 2032 assuming the program stays in place), geothermal heat pumps are different and are accounted for in a different part of Form 5695.  They, along with several other things like solar and battery storage, do not have a cap on the credit. It's just 30% of the cost.  The credit is a different one, though. It's the Residential Clean Energy Credit.

These credits are pretty amazing when I stop and think about it in terms of effective tax burden/initial cost. Granted, they're not the easiest to navigate but oh well. Doing your own taxes is a continuous learning process year after year!

[RWD]

I get what you're saying about the difficulty in breaking down the components.

A heat pump is just an A/C unit that can be run in reverse. There aren't separate components to break out. Since a heat pump is basically a superset of air conditioning it would seem weird to me if you could claim both credits, but I haven't read about those in depth.

[simonsez]

I get what you're saying about the difficulty in breaking down the components.

A heat pump is just an A/C unit that can be run in reverse. There aren't separate components to break out. Since a heat pump is basically a superset of air conditioning it would seem weird to me if you could claim both credits, but I haven't read about those in depth.

Thanks for the breakdown, that makes sense. 

I don't know why the IRS and Dept of Energy would be so careful to talk about heat pumps as a separate up to $2000 credit adjacent to the up to $1200 credit for A/C and other things (windows, doors, energy audits, etc.).  Like if there was a one line sentence along the lines of "if you installed a heating and cooling system that contains a non-geothermal heat pump and qualifies for up to $2000, you may not also claim up to $600 for a SEER2 rating above 17.0 on an efficient A/C system but you may still receive a credit for windows, etc." (or if you actually can do both, just say that!).

I assume that since part of 2025 is gone, taxpayers will be able to claim the same clean energy tax credits when filing 2025 taxes early next year.  I.e. If Trump got rid of it in 2025, since people have already purchased things this year that would qualify, my guess is it would not go into effect until 2026 but who knows.  I have a couple more windows that could be replaced in 2025 and I'll be sure they are the Energy star rated ones plus a new front door.  It's nice that you don't have to itemize to get these.  Pecuniary incentives work!