Federal 25C Tax Credit:
How to Claim (2024)

Step 3: Go to Part II, Section B – Heat Pumps

Go directly to line 29 (Heat pumps and heat pump water heaters):

1. Enter your costs:
   
   • Line 29a: Enter the total cost of your electric or natural gas heat pump
   • Line 29b: Enter the cost of heat pump water heater (if applicable)
   • Line 29c: Leave blank (for biomass stoves)
   • Line 29d: Add up lines 29a and 29b
   • Line 29e: Multiply line 29d by 30% (0.30)
     
     • The maximum credit allowed is $2,000
2. Complete the final calculations:
   
   • Line 30: Add lines 28 and 29e
   • Line 31: Enter your tax liability limit (from worksheet in instructions)
   • Line 32: Enter the smaller amount from line 30 or 31

Important Notes

• The credit is limited to $2,000 for heat pumps and heat pump water heaters
• This is a tax credit, not a deduction, meaning it reduces your tax liability dollar-for-dollar
• Keep all receipts and documentation for your records

Filing Instructions

1. Include this completed Form 5695 with your tax return
2. Transfer the credit amount from line 32 to Schedule 3 (Form 1040), line 5b
3. Submit with your complete tax return

Additional Information

• This is a non-refundable tax credit, meaning it can only reduce your tax liability to zero
• The credit is available for qualifying heat pumps installed during the 2024 tax year
• Consult a tax professional for specific advice about your situation

Note: This guide is for informational purposes only. Please consult with a qualified tax professional for advice specific to your situation.