Heat Pump Tax Deductions

The IRS allows you to take a tax deduction for the cost to purchase and install a qualified geothermal heat pump on your property. The government calculates your deduction as a residential energy efficient property credit. Geothermal heat pumps use the warmth in the ground to produce heat and are quieter than standard heat pumps.


Qualified heat pumps must meet energy efficiency standards specified by the Environmental Protection Agency. Typically, geothermal heat pumps use 30 percent less energy than traditional air heat pumps.

Placed in Service

Your heat pump must be placed in service ready for use by the end of 2016 to qualify for the tax credit.

Tax Forms

On your federal tax return, use IRS tax Form 1040, Schedule 5695 to take your geothermal heat pump deduction.

Deductible Amount

As of 2011, you may deduct up to 30 percent of the cost of a qualified heat pump installed on an existing property or on new construction.

Energy Star

Look for products that carry an approved Energy Star rating to be sure your heat pump qualifies for the tax deduction.