Why can't I get an energy credit for my new heatpump split system auxiliary heater?

[kpravera]

TurboTax says I am not eligible. I don't understand why

[BrittanyS]

The credit would only apply if the heat pump was for a primary existing home improvement and does not qualify for a new home, per the IRS requirements for Energy Efficient credits.

The heat pump would have to meet the qualifications set by the IRS.  The following are required to claim the credit per the IRS website.

"Heat pumps that meet or exceed the CEE highest efficiency tier, not including any advanced tier, in effect at the beginning of the year when the property is installed, and biomass stoves and boilers with a thermal efficiency rating of at least 75% qualify for a credit up to $2,000 per year. Costs may include labor for installation."

Qualified property includes new:

• Electric or natural gas heat pumps
• Electric or natural gas heat pump water heaters
• Biomass stoves and boilers

[AmeliesUncle]

Have you entered your income yet?  The credit can only offset your income tax, so if you don't have income tax due, the credit can't offset that tax.

[LaneyN]

I entered my income and the energy credit for 2025 is $0. Is there a known glitch for this credit?

[LaneyN]

Also, I entered the correct QM Code for the manufacturer, however I did not see where you enter any data on the unit. Do we enter a model number anywhere?

[RogerD1]

Please check the following website to determine if your heat pump qualifies for the tax credit:  US DOE Tax Credit Product Lookup Tool.  This will let you know whether you heat pump qualifies for the credit.

If this tool shows that you are eligible for the credit, please check all entries in TurboTax.  To qualify, it has to be on an existing and not new property located n the US and placed in service by you - those two questions need to be answered yes in TurboTax.  Make sure that the home address matches up with the property where the energy efficient property was installed.

Also, as mentioned earlier, getting this credit requires you to have a tax liability - the amount of the credit may be limited if it exceeds your tax liability or zero if you have no tax liability.

[LaneyN]

I am working with Fujitsu to investigate why they are not listed.

[user17723141501]

I have had $3000 of Federal tax withheld and owe $2775 in taxes, so I have a tax refund of $225. Do I have a "tax liability" that enables me to receive the tax credit on form 5695? Or do I need to owe more in taxes than the amount that's already been withheld? The IRS language regarding this issue is not clear to me.

[user17723141501]

Does "income tax due" mean that I have income for which I need to be taxed or does it mean that my income tax exceeds the amount that has already been withheld automatically from my income sources?

[VictoriaD75]

Your initial tax liability will be calculated on line 16 of Form 1040. If you have any additional taxes due, this will carry over from Schedule 2 to line 17 with your total tax liability reported on line 18. Tax credits reduce this tax liability dollar-for-dollar. For example, if you have a dependent that qualifies for the Child Tax Credit, you will see a credit of $2,200 (tax year 2025) on line 19 reducing the amount calculated. If you qualify for other tax credits from Schedule 3, like the energy credit, they will be reported on line 20, further reducing your tax liability. These tax credits can reduce your tax liability to 0, but cannot add to your refund. Your final calculated tax liability will be reported on line 24.

Your final tax liability is not the same thing as an amount due. The tax return reconciles this amount with any payments already received through regular withholding or estimated tax payments. Those amounts are reported on lines 25 & 26. If you are eligible for refundable tax credits, such as Earned Income Credit, those amounts will be reported on lines 27-31. Refundable credits can increase your tax refund if your liability on line 24 was already 0.

If the total amount of your payments exceed your tax liability, you will have a refund on line 34. If your tax liability exceeds your payments, you will have a balance due on line 37. 

If you have a tax liability that would allow an offset from the tax credit on Form 5695, you would see the amount on lines 16 & 18. Review your return based on the information above to determine if your amounts correspond to the tax calculations and credits mentioned.

Form 1040

@user17723141501 

[user17723141501]

Thanks for your detailed reply. With that in mind, there doesn't appear to be any reason why I shouldn't get a $2000 energy-saving improvement tax credit after having completed the form and double-checked my work. However, the TurboTax form says that I am not eligible for any tax credit. Unfortunately, it doesn't list a reason why and I've been unable to determine the reason myself. I'm reluctant to pay a TurboTax "expert" to figure out an answer. I tried using the Chat function to find an answer but it was useless.

[LindaS5247]

TurboTax may not be giving you the energy credit for your new heat pump split system because the requirements below are not met:

For the energy efficiency home improvement credit, the home must be:

• Located in the United States
• An existing home that you improve or add on to, not a new home
• Generally, the home must be your primary residence.
• You can't claim the credit if you're a landlord or other property owner who doesn't live in the home.

 You would enter the information for your new heat pump split system in TurboTax under "Deductions & Credits,"  "Your Home," and then "Home Energy Credits."

You can go back through those sections and review your TurboTax screens to make sure you have answered everything correctly.

You can easily get to these TurboTax input screens as follows:

1. Click on Search in the top right of your TurboTax screen
2. Type (exactly) 5695, residential energy credit in the search box
3. Click on the link Jump to 5695, residential energy credit
4. This will take you to the input screen in TurboTax to enter your information regarding your heat pump
5. Your screen will say Energy Efficient Home Improvements
6. Continue through your TurboTax screens to make sure you have answered everything correctly

Also make sure that your TurboTax program is fully updated.

TurboTax Online updates for new tax laws and other features, but they are done automatically in your web browser. You do not have to manually update like in TurboTax desktop software.  

If you are using TurboTax Desktop, you can manually check for updates for  your TurboTax program by clicking on "Online" in the black bar near the top of your screen and selecting "Check for Updates."

Click here for Where do I enter qualified energy-saving improvements?

 Click here for Energy Efficient Home Improvement Credit

Click here for 2024-2025 Energy Tax Credit: Which Home Improvements Qualify?

Please return to Community if you have any additional information or questions and we would be happy to help.