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What You Need To Know About The Heat PumpTax Credit



Gallagher’s Blog


What You Need To Know About The Heat Pump

Tax Credit


March 5, 2023


It has never been a better time to get a heat pump installed in your home! The federal government is now offering 30% (up to $2,000) tax credit for the cost of material and installation of these systems! Read on to learn more.



What is a heat pump?


Heat pumps are energy efficient systems that can provide heating and cooling. They relocate heat rather than convert fuel into heat. These systems provide heat by taking heat from the outside into your home. They provide cooling by pulling heat from inside your home to the outside.


Heat pumps can be ducted (Air Source Heat Pumps) or ductless (Mini Splits). Ducted systems (often referred to as central AC) use existing (or new ductwork) to provide heating and cooling throughout the home. Ductless systems (AKA mini splits) can be installed to heat and cool a section of your home. These systems are mounted directly on an interior wall or ceiling and have an outdoor unit as well.



Why should I get a heat pump?


Air Source Heat Pumps (ASHP)

These systems can help cut energy costs for your home. They can be connected to conventional forced-air ductwork systems. These systems move heat rather than convert it using fuel. This results in more efficient heat for your home and no direct emissions (AKA carbon dioxide). The benefits for ASHP may include:

  1. Lower energy bills

  2. Better indoor air quality

  3. No fuel storage

  4. No risk for running out of fuel

  5. Up to $2,000 in tax credits

Mini Splits

These systems can offer heating and cooling in your home when you do not have ductwork in place. They can reduce energy consumption by up to 60% compared to standard home electric radiators and have no direct emissions (i.e. carbon dioxide). They offer quiet and efficient cooling systems in the warm summer months. The benefits mini splits may include:

  1. Lower energy bills

  2. Better indoor air quality

  3. No fuel storage

  4. No risk of running out of fuel

  5. Up to $2,000 in tax credits


How much does it typically cost to install a heat pump?


Air Source Heat Pumps

The expense depends on the size of your home, quality of existing ductwork, and the size of the system required. Typically, a good quality system cost range is $4,200-8,000. If new ductwork is required, it can increase the cost. Though, there are so many variables in place it is best to get a free estimate from Gallagher Plumbing, Heating, & Cooling.


Mini Splits

The cost of a good quality mini split depends on the location, type (ceiling or wall), and size of the system required. Typically one mini split installed can cost between $5,000-9,000 and two mini splits is $7,000-10,500.



It sounds too good to be true. What are the cons of heat pumps?


Air Source Heat Pumps (ASHP)

These systems, as previously mentioned, require ductwork. Therefore, if you do not have existing ductwork in your home it will increase the initial expense. Also, these work well for most weather conditions, however, on really cold days (think close to 0ºF) they may require an additional heat source.


Mini Splits

These systems do not work as effectively on really cold days (just like the ASHP systems). Therefore, additional heating may be required.



Is there a catch to the tax credit?


The tax credit is for 30% of the cost of the heat pump and installation. However, it caps at $2,000. It can be impacted by other tax credits you are receiving. There is an annual limit on energy efficient home improvements. For example, if you are also purchasing a heat pump water heater and getting a tax credit for this, you may not qualify for the full $2,000 for the heat pump.


There are specific heat pumps that qualify for the tax credit. They must meet certain criteria. Energy Star has a list here for Air Source Heat Pumps and here for mini split systems.



What else do I need to know?


To save the most energy do not change the temperatures often. These work best by setting a comfortable temperature and leaving it there. Avoid using the “auto” mode. Set it to “heat” when it is a cooler season and “cool” in warmer temperatures. The filter should be cleaned regularly - when visibly dirty and when the filter light is on.



Please reach out to Gallagher Plumbing, Heating, and Cooling if you have further questions or would like a free estimate for a system install.



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