Home Energy Credits for Heat Pumps-What Costs are Elegible?

[bfamily9]

I have looked through the IRS FAQs and these discussions explaining the credits for heat pumps. I have not seen an answer. In 2025 I had a contractor install a heat pump as a replacement for a gas furnace. The system included an air handler $2,617, an outdoor unit/heat pump $3,895, smart thermostat $700, new electrical sub panel $1,885, permit $1,177 and materials $2,450. With labor, other costs and discounts the final cost was $16,589. Which of these costs can I claim and enter in TurboTax? Second question: TurboTax asks to enter the cost of the most expensive heat pump. Then it asks to enter the cost of the next heat pump. How should I enter these costs to get the maximum eligible $2,000 credit?

[DaveF1006 · Accepted solution]

Yes, here is how you will report this.

1.  Report the heat pump, air handler, Materials & Labor, and permits in the section labeled cost of the most expensive heat pump. Here, you need the manufacturer's ID number for the heat pump. 
2. Turbo tax will not let you exit the screen without listing a value for the cost of a home energy audit. Here, enter $1 if you didn't pay for an audit to move past the page. if you paid, enter the cost you paid for it.
3. After entering the information on this screen, the next screen will ask you if you wish to enter information about an upgrade. Here you will say yes.
4. The next screen will allow you to enter information about the electrical panel toward the bottom of the screen.
5. A 4-character QMID is required for the electrical panel. It will ask for the total cost to install the electrical panel.
6. The thermostat is not classified as an energy improvement, so you can't claim that.