How to Claim Your Heat Pump Tax Credit: IRS Form 5695 Step-by-Step Guide

If you installed a heat pump in 2025, you can claim up to $2,000 back on your federal taxes. But filing for this credit requires the right form, the right codes, and knowing exactly which lines to fill out. This guide walks you through the entire process with a real-world example.

What Is the Heat Pump Tax Credit?

The Section 25C Energy Efficient Home Improvement Credit offers:

• 30% of total installation cost (equipment + labor)
• Up to $2,000 maximum for heat pumps
• Non-refundable credit (reduces tax owed, but no refund beyond zero)
• Annual limit (you can claim it each year you make qualifying improvements)

Important deadline: This credit expires December 31, 2025. Installations after this date will not qualify.

What You'll Need Before Filing

Gather these documents before starting Form 5695:

1. Contractor invoice showing:

   • Equipment make and model
   • Installation date
   • Itemized costs (equipment and labor)

2. Manufacturer's QMID (Qualified Manufacturer ID) (see table below)

3. AHRI certificate (your contractor should provide this)

4. Your Form 1040 (to determine your tax liability)

QM Codes for Major Heat Pump Brands

For 2025 installations, the IRS requires a 4-digit Qualified Manufacturer (QM) code. Here are the codes for brands we commonly install:

Brand	QM Code	Parent Company
Daikin	I7Q6	Daikin Industries
Goodman	I7Q6	Daikin Industries
Amana	I7Q6	Daikin Industries
Mitsubishi	E8X7	Mitsubishi Electric
Carrier	N8H2	Carrier Global
Bryant	N8H2	Carrier Global
Bosch	K3M2	Bosch
Fujitsu	F8N3	Fujitsu General
Lennox	L7S0	Lennox International
Trane	B8T9	Trane Technologies
American Standard	B8T9	Trane Technologies
Rheem	K3A8	Rheem Manufacturing
Heil	N8H2	ICP (Carrier)
Friedrich	N2V1	Friedrich
LG	S8T5	LG Electronics
Midea	X7Z8	Midea
AO Smith (water heater)	A5X5	AO Smith
Bradford White (water heater)	V5B3	Bradford White
Navien (water heater)	M6G5	Navien

Important: Always verify your QMID code with your HVAC contractor or manufacturer before filing. Codes are updated periodically, and your contractor should provide the correct code with your installation paperwork. You can also check the IRS Qualified Manufacturers page to confirm your manufacturer is registered.

Step-by-Step: Filling Out IRS Form 5695

Form 5695 has two parts. For heat pumps, you'll use Part II: Energy Efficient Home Improvement Credit.

Lines 24-28: Other Improvements (Skip if N/A)

These lines cover windows, doors, insulation, and home energy audits. Skip to line 29 if you only installed a heat pump.

Lines 29a-29h: Heat Pumps and Water Heaters

Line 29a: Enter your heat pump's QM code and cost

• Format: QM code, then dollar amount
• Example: "I7Q6 $14,500"

Line 29b: If you installed multiple heat pumps, enter additional units here

Line 29c: Heat pump water heater QM code and cost (if applicable)

Line 29d: Additional heat pump water heaters (if applicable)

Line 29e-29f: Biomass stoves (skip if not applicable)

Line 29g: Add lines 29a through 29f together

Line 29h: Multiply line 29g by 30% (0.30). Maximum is $2,000.

Lines 30-32: Calculating Your Credit

Line 30: Add line 28 (other improvements) + line 29h (heat pump credit)

Line 31: Enter your tax liability from Form 1040, line 18

Line 32: Enter the smaller of line 30 or line 31. This is your actual credit.

Complete Example: Filing for a Mitsubishi Heat Pump

Let's walk through a real example:

The Scenario

Homeowner: Sarah in Walnut Creek Equipment: Mitsubishi ductless heat pump system Total installed cost: $18,500 Tax liability (Form 1040, line 18): $8,200

Form 5695 Entries

Line	Description	Sarah's Entry
29a	Heat pump QM code and cost	E8X7 $18,500
29b	Additional heat pumps	—
29c	Heat pump water heater	—
29g	Total (sum 29a-29f)	$18,500
29h	Line 29g × 30% (max $2,000)	$2,000
30	Line 28 + Line 29h	$2,000
31	Tax liability (from 1040)	$8,200
32	Smaller of line 30 or 31	$2,000

The Result

Sarah claims the full $2,000 credit on her tax return. Since her tax liability ($8,200) exceeds her credit ($2,000), she gets the maximum benefit.

Note: If Sarah's tax liability were only $1,500, she could only claim $1,500. The credit is non-refundable—it can reduce your tax to zero but won't create a refund.

Common Questions

Can I claim the credit if I got rebates?

Yes, but you may need to subtract certain rebates from your cost basis. State and utility rebates typically don't reduce your credit, but be sure to consult a tax professional for your specific situation.

What if I installed the heat pump late in December?

As long as the installation was completed by December 31, 2025, you qualify. Keep your dated invoice as proof.

Do I need to itemize deductions?

No! The 25C credit is a tax credit, not a deduction. You can claim it even if you take the standard deduction.

Can I claim this credit every year?

Yes, through 2025. If you make qualifying improvements in multiple years, you can claim up to $2,000 for heat pumps each year.

What about the $3,200 annual cap I've seen mentioned?

The $3,200 cap is for ALL 25C improvements combined (windows, doors, insulation, heat pumps, etc.). Heat pumps alone are capped at $2,000 within that total.

What Happens After 2025?

The 25C tax credit expires December 31, 2025. There are currently no plans to extend it. If you're considering a heat pump, installing before year-end is the only way to capture this federal incentive.

However, California-specific rebates (like TECH Clean California and BayREN) may still be available. Contact us for current rebate information.

How Galaxy Helps with Tax Credit Documentation

When you install a heat pump with Galaxy Heating & Air Conditioning, we provide:

1. Detailed invoice with model numbers and installation date
2. Manufacturer's QM code for your specific equipment
3. AHRI certificate confirming efficiency ratings (not required to file, available upon request)
4. Manufacturer's certification statement for tax purposes (not required to file, available upon request)

Our paperwork is designed to make tax filing straightforward. We've helped hundreds of Bay Area homeowners claim their credits successfully.

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Disclaimer: This article provides general information about the 25C tax credit and IRS Form 5695. It is not tax advice. Consult a qualified tax professional for guidance specific to your situation.