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Home Energy Rebates vs. Tax Credits: Incentive FAQs for HVAC Sales Teams

January 18, 2022

With tax season upon us, now is the perfect time to remind homeowners of the federal tax credits they may be eligible for if they upgrade their HVAC systems. But we know the incentive landscape can be complicate to navigate and communicate with customers, so we put together this handy cheat sheet on the basics

What's the difference between a rebate and a tax credit?

A rebate is a cash-back incentive that a homeowner receives either right away as an instant discount or a few weeks after the install, in the form of a check or a pre-paid credit card.

A tax credit is a program designed to give a specific dollar amount in credit off of the taxes that the homeowner owes at the end of the tax year. They will either see this materialize in the form of a lower tax bill, or, if they are owed a tax refund, a higher tax refund.

Do homeowners need to do anything to claim their heat pump tax credit?

Yes, the homeowner is responsible for filing Form 5695, Residential Energy Credits Part II, with their tax return to claim the credit. They must claim the credit for the tax year when the system was installed.

How do I fill out form 5695?

Here are specific filing instructions for anyone filing Form 5695:

  1. Fill out your Name, Social Security Number, and your main home's address.
  2. Continue filling out lines 17 through 32. In Section B Line 29abc, enter the total invoice amount for heat pumps and/or heat pump water heaters.
  3. Add the relevant tax credit details to your standard Form 1040 during the tax filing process.
  4. Ensure Form 5695 is included when filing your taxes to claim the credit accurately.

Is the tax credit program still live?

Yes, the federal tax credit program for heat pumps is still live.