Form 5695 Guide: Complete Instructions for Energy Tax Credits (2025)

Form 5695 is how you claim residential energy credits on your federal tax return. If you installed a qualifying heat pump, water heater, AC, windows, or other equipment by December 31, 2025, this is the form you need.

The form has multiple parts and calculation worksheets, but a straightforward heat pump or equipment credit only touches a portion of it. This guide covers every line.

What Form 5695 Does

This form handles two types of credits:

Part I: Residential Clean Energy Credit (solar panels, wind, geothermal, battery storage)

Part II: Energy Efficient Home Improvement Credit (heat pumps, AC, insulation, windows)

For heat pumps, you're working in Part II. Part I is for bigger installations like solar panels.

Before You Start: Documents You Need

Gather these before sitting down with the form:

Good to have:

• Payment receipts
• Contract or work order
• Equipment specifications or model numbers

The invoice is most important. It should show the installation date, itemized costs, and confirm the work was completed. If your invoice doesn't clearly identify the heat pump model, get clarification from your contractor.

Part II: Line by Line

Form 5695 Part II has two sections:

• Section A (Lines 17-20): Qualified Energy Efficiency Improvements (insulation, doors, windows)
• Section B (Lines 21-32): Residential Energy Property Expenditures (heat pumps, AC, water heaters)

Heat pumps fall under Section B. Here's what you need to fill in.

Section A (Lines 17-20): Building Envelope Improvements

Section A covers improvements to your home's building envelope: insulation, doors, windows, and skylights. These items have a combined $1,200 annual limit (shared with Lines 22-26 in Section B).

Lines 17a-17e: Qualifying Questions

Answer these questions to determine if you qualify for Section A credits:

• 17a: Are improvements installed in your main home in the US? (Yes required)
• 17b: Are you the original user? (Yes required)
• 17c: Will components remain in use for at least 5 years? (Yes required)
• 17d: Enter your main home address
• 17e: Were improvements related to construction? (If Yes, only post-construction improvements qualify)

Line 18: Insulation and Air Sealing

• 18a: Enter cost of insulation or air sealing materials/systems that meet IECC standards
• 18b: Multiply by 30%, max $1,200

Qualifying materials include spray foam, blown-in insulation, batt insulation, and air sealing products specifically designed to reduce heat loss/gain.

Line 19: Exterior Doors

Exterior doors must meet Energy Star requirements.

• 19a: Cost of most expensive door
• 19b: QMID of that door
• 19c: 30% of 19a, max $250 per door
• 19d: QMID and cost of next two most expensive doors
• 19e: Cost of all other qualifying doors
• 19h: Total door credit, max $500

Line 20: Windows and Skylights

Windows and skylights must meet Energy Star certification requirements.

• 20a: QMID and cost of four most expensive windows/skylights
• 20b: Cost of all other qualifying windows/skylights
• 20c: Total window costs
• 20d: Multiply by 30%, max $600

Section B: Residential Energy Property

Lines 21a-21b: Qualifying Questions

Answer "Yes" to confirm you installed qualified energy property in a US residence that you placed into service during the tax year.

Line 21c: Property Address

Enter the address where you installed the heat pump.

Lines 22-24: Central AC, Water Heaters, Furnaces

These lines cover other residential energy equipment with a $600 credit cap each:

Line 22: Central Air Conditioners

• 22a: Enter QMID and cost of most expensive central AC
• 22b: Cost of other central ACs (if any)
• 22d: 30% credit, max $600

Line 23: Natural Gas, Propane, or Oil Water Heaters

• 23a: Enter QMID(s) and cost(s) of up to two most expensive water heaters
• 23b: Cost of other qualifying water heaters
• 23d: 30% credit, max $600

Line 24: Furnaces and Boilers

• 24a: Enter QMID and cost of most expensive furnace or hot water boiler
• 24b: Cost of other furnaces/boilers
• 24d: 30% credit, max $600

Line 25: Electrical Panel Upgrades (Enabling Property)

This is separate from your heat pump credit and often overlooked. The IRS calls this "enabling property": electrical infrastructure that enables the installation of qualified energy equipment.

Line 25a: Qualifying Question

Answer "Yes" if you installed improvements or replacements of:

• Panelboards
• Subpanelboards
• Branch circuits
• Feeders

...specifically to enable installation of qualified energy efficient equipment (like a heat pump), and both the electrical work and the equipment were installed in the same tax year.

Line 25b: Enabled Property Code

Enter the code for what type of equipment the electrical work enabled:

For heat pump installations, enter code "E". For heat pump water heaters, enter code "H". You can enter multiple codes if the electrical work supports multiple equipment types.

Line 25c: Electrical Costs

Enter the cost of the electrical improvements from your contractor invoice. This includes:

• Panel upgrade costs
• New circuit installation
• Breaker costs
• Labor for electrical work

Line 25d: QMID of Enabled Property

Enter the QMID of the equipment that the electrical work enabled (your heat pump or HPWH QMID). Two slots are provided if you enabled multiple equipment types.

Line 25e: Enabling Property Credit

Multiply Line 25c by 30% (0.30). Maximum credit is $600.

Example: You paid $1,500 for an electrical panel upgrade to support your new heat pump.

• $1,500 × 0.30 = $450
• Enter $450 on Line 25e

This $450 is in addition to your heat pump credit on Line 29h.

Line 26: Home Energy Audits

If you paid for a home energy audit, you can claim up to $150.

Line 26a: Qualifying Question

Answer "Yes" if you paid for a home energy audit that:

• Inspected your main home in the United States
• Resulted in a written report prepared by a certified home energy auditor

Line 26b: Audit Cost

Enter the cost of the home energy audit.

Line 26c: Audit Credit

Multiply Line 26b by 30% (0.30). Maximum credit is $150.

Lines 27-28: Section B Subtotal

Line 27: Add All Section B Credits (except Line 29)

Add lines 18b, 19h, 20d, 22d, 23d, 24d, 25e, and 26c.

Line 28: Apply $1,200 Cap

Enter the smaller of Line 27 or $1,200. This is the annual limit for these categories.

Line 29: Heat Pumps

Line 29a: QMID and Cost of Primary Heat Pump

This line has two parts:

1. QMID boxes: Enter your manufacturer's 4-character QMID code in the boxes provided
2. Cost field: Enter the cost of your most expensive heat pump

Find your QMID using our searchable directory. Enter the brand name on your equipment, and we'll show you the correct manufacturer code.

Enter only the code, no spaces, no dashes. If your QMID is "N8H2", fill in one character per box.

Line 29b: Other Heat Pump Costs

If you installed additional heat pumps, enter their combined cost here. If you only have one heat pump, enter -0-.

Line 29c: Heat Pump Water Heater (HPWH)

If you installed a heat pump water heater, enter:

1. QMID boxes: Your HPWH manufacturer's 4-character QMID code
2. Cost field: Cost of your most expensive heat pump water heater

Line 29d: Other HPWH Costs

If you installed additional heat pump water heaters, enter their combined cost here. If you only have one, enter -0-.

Lines 29e-29f: Biomass Stoves and Boilers

These lines cover biomass stoves and biomass boilers. Skip if not applicable.

Line 29g: Total

Add lines 29a through 29f.

Line 29h: Heat Pump Credit Calculation

Multiply line 29g by 30% (0.30). The maximum is $2,000.

Example: $7,000 × 0.30 = $2,100. Enter $2,000 (the cap).

Lines 30-32: Final Credit

Line 30: Combined Total

Add line 28 (other Section B items) and line 29h (heat pumps).

Line 31: Tax Liability Limitation

Enter the amount from the Energy Efficient Home Improvement Credit Limit Worksheet. This ensures your credit doesn't exceed your tax liability.

Line 32: Your Credit

Enter the smaller of line 30 or line 31. This is your Energy Efficient Home Improvement Credit. Transfer this amount to Line 5b on Schedule 3 (Form 1040).

Transferring to Your Tax Return

The credit from Form 5695 goes to Schedule 3 (Form 1040), line 5b. From there, it transfers to your main Form 1040.

If you use tax software, it handles these transfers automatically. Just make sure the numbers carry over correctly.

Common Mistakes

If You Have Multiple Improvements

Installing a heat pump plus new windows? Enter each type on its appropriate line:

• Windows go on Section A lines (subject to $600 limit per item type)
• Heat pump goes on Line 29 (subject to $2,000 limit)

What If My Credit Exceeds My Tax?

The 25C credit is non-refundable. It can reduce your tax liability to zero but won't generate a refund beyond what you've already paid.

Example: You owe $1,200 in federal taxes. Your heat pump credit is $2,000. You'll reduce your taxes to $0, but the extra $800 doesn't carry forward.

Record Keeping

Keep these documents for at least 3 years after filing:

• Completed Form 5695
• Contractor invoice
• AHRI certificate
• Payment records
• QMID source documentation

The IRS can audit returns up to 3 years after filing (longer if they suspect fraud). Having clean records prevents headaches.

Using Tax Software

Most tax software (TurboTax, H&R Block, FreeTaxUSA, etc.) has a section for energy credits. Look for:

• "Residential energy credit"
• "Energy efficient home improvement"
• "Form 5695"

The software will ask for your costs, equipment type, and QMID. It handles the calculations automatically.

Make sure the software correctly identifies your heat pump as qualifying for the $2,000 limit (not the lower $600 limit for standard AC).

Official Resources

Form 5695 Checklist

Use this checklist before submitting:

Download the Checklist

We've created a printable PDF checklist for Form 5695 preparation. Download it, check off items as you gather documents, and keep it with your tax records.

Download Form 5695 Checklist PDF

Getting Your QMID

Your manufacturer's QMID is an IRS registration code. Manufacturers must label each item with it, but the label is easy to miss and it is rarely on the invoice. Look it up in our QMID directory by brand name, or call the manufacturer and ask.