What the 2024 energy tax credit covers
The Inflation Reduction Act energy tax credit lets you deduct money from your federal income tax for certain appliances you buy and install in your home. The credit applies to new appliances only — not used ones — and the appliance must be installed in a home you own or rent (not a second home or investment property).
The appliances that may have access to fall into two groups: those that reduce heating and cooling costs, and those that reduce water heating or cooking costs. Each category has its own dollar limit per appliance and its own income limits that determine how much credit you can claim.
You claim this credit on your 2024 tax return using Form 5695, Part II. The credit is nonrefundable, meaning it reduces your tax bill but cannot result in a refund if your credit is larger than the tax you owe.
Key Takeaways
- Heat pumps, heat pump water heaters, and heat pump clothes dryers each have a $2,000 credit limit; central air conditioners have a $1,500 limit; and furnaces have a $600 limit.
- The appliance must be new, installed in your primary residence, and purchased in 2024 to count toward the 2024 tax year.
- Your household income must fall below certain thresholds to claim the full credit; higher incomes reduce or eliminate the credit.
- You will need the manufacturer's certification statement (usually on the receipt or product documentation) proving the appliance meets federal efficiency standards.
- You cannot claim a credit for the same appliance twice, and some appliances (like a new furnace) may disqualify you from claiming a credit for a heat pump in the same year.
Heating and cooling appliances that may have access to
Air-source heat pumps (used for heating and cooling) have a $2,000 credit limit per unit. Ground-source heat pumps (also called geothermal) have a $3,000 limit. Both must meet Department of Energy efficiency ratings. A standard central air conditioner has a $1,500 limit. A furnace (gas, oil, or electric) has a $600 limit.
You can claim a credit for only one heating system per year. This means if you install both a furnace and a heat pump in the same year, you choose which one to claim. The appliance must be installed in your home by December 31, 2024, to count on your 2024 return.
The manufacturer must certify that the unit meets the efficiency standard. This certification is usually printed on a label attached to the appliance or included in the product documentation that came with it. Keep this documentation when you file your return.
Water heating and cooking appliances that may have access to
Heat pump water heaters have a $2,000 credit limit. Heat pump clothes dryers also have a $2,000 limit. Electric stoves and cooktops have a $500 limit per appliance. Electric heat pump pool heaters have a $2,000 limit.
Unlike heating systems, you can claim credits for multiple water heating or cooking appliances in the same year — for example, both a heat pump water heater and an electric stove. However, you cannot claim a credit for the same appliance twice, and the appliance must be new and installed in your primary residence in 2024.
Induction cooktops and electric resistance cooktops both count as electric stoves for credit purposes. Gas stoves, gas water heaters, and traditional electric resistance water heaters do not may have access to.
Income limits that reduce or eliminate your credit
Your household income determines whether you can claim the full credit, a reduced credit, or no credit at all. The income thresholds vary by filing status and are adjusted each year. For 2024, the limits are higher than in 2023, but the exact amounts depend on your tax filing status (single, married filing jointly, head of household, or married filing separately).
If your income exceeds the threshold for your filing status, the credit phases out — meaning it shrinks by a set percentage for each dollar over the limit. At a certain income level, the credit reaches zero and you cannot claim it.
You will need your 2024 adjusted gross income (AGI) from your tax return to determine whether you may have access to. If you are unsure whether your income falls within the limit, calculate your AGI first, then check the IRS instructions for Form 5695 to see the current year thresholds.
Documents you need to keep for your return
Gather the manufacturer's certification statement or efficiency label for each appliance you are claiming. This is usually a sticker on the unit itself or a document in the box. The label must show that the appliance meets the Department of Energy efficiency standard for that appliance type.
Keep your receipt or invoice showing the purchase date and the appliance model number. The appliance must have been purchased in 2024 to count on your 2024 return. If you had it installed by a contractor, keep the installation invoice as well — it should show the date the appliance was placed in service (installed).
You do not need to send these documents to the IRS when you file, but keep them in your records for at least three years in case the IRS asks to verify your claim.
How to claim the credit on your tax return
You claim the energy tax credit on Form 5695, Part II (Residential Energy Credits). List each appliance separately, including the type of appliance, the year it was installed, and the credit amount you are claiming (up to the limit for that appliance type).
Add up all your appliance credits and enter the total on Form 5695. Then transfer that amount to Form 1040 (your main tax return) on the line for nonrefundable credits. The credit reduces your total tax bill dollar for dollar.
If you use tax software, the program will usually walk you through the questions and fill in Form 5695 for you. If you prepare your return by hand or with a tax professional, make sure to have your appliance documentation ready when you file.
Appliances that do not may have access to
Used appliances do not may have access to, even if they are new to you. The appliance must be manufactured after 2023 and purchased in 2024. Appliances installed in a vacation home, rental property, or investment property do not may have access to — only your primary residence counts.
Gas furnaces, gas water heaters, gas stoves, and traditional electric resistance water heaters do not may have access to. Portable air conditioners and window units do not may have access to. If you replace an appliance that broke, the replacement still must be new and meet the efficiency standard to count.
You cannot claim a credit for labor or installation costs — only for the cost of the appliance itself. You also cannot claim a credit if you received a rebate or other incentive from your utility company or state for the same appliance, though some state programs are designed to work alongside the federal credit.
Frequently Asked Questions
Can I claim a credit if I bought the appliance in 2023 but installed it in 2024?
No. The appliance must be purchased and installed in the same tax year. If you bought it in 2023 and installed it in 2024, you would claim the credit on your 2023 return (if you did not already). Check your 2023 return to see if you claimed it.
What if I do not have the manufacturer's certification label?
Contact the manufacturer or retailer with your model number and ask them to provide written confirmation that the appliance meets the Department of Energy efficiency standard. Keep that confirmation with your tax records. Without proof the appliance qualifies, you cannot claim the credit.
Can I claim a credit for a heat pump if I also installed a new furnace in 2024?
No. You can claim a credit for only one heating system per year. If you installed both, you must choose which one to claim on your return. Most people choose the heat pump because it has a higher credit limit ($2,000 versus $600).
Do I have to own my home to claim this credit?
No. Renters can claim the credit if they installed the appliance in their primary residence and have the landlord's permission to do so. You will need to show proof of installation (receipt, invoice, or contractor statement) on your return.
What happens if my credit is larger than my tax bill?
The credit is nonrefundable, so it can only reduce your tax bill to zero. Any unused credit cannot be carried forward to future years or result in a refund. This is different from refundable credits, which can result in a payment to you.