The Residential Energy Credits are still available in 2025. They will be eliminated for anything placed in service after December 31, 2025. Be sure to have it installed and operational by the end of the year.
It's a non-refundable credit, which means it reduces your tax owed, but any unused portion will not increase your refund.
The amount of the credit depends on the type of system you install:
Heat Pumps and Heat Pump Water Heaters: You can receive a tax credit for 30% of the cost, up to $2,000.
Central Air Conditioners, Furnaces, and Boilers: You can receive a tax credit for 30% of the cost, up to $600.
It's important to note that there is a total annual credit limit of $3,200, which includes a sub-limit of $1,200 for other qualifying improvements like insulation, windows, and doors, and a separate $2,000 limit for heat pumps and biomass stoves or boilers.
You'll enter the information in the Deductions and Credits section of TurboTax and the form 5695 will be populated and flow to Schedule 3 of the 1040-SR. The total of credits on from Schedule 3 flows to line 20 on the 1040.
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Cindy
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