Types

• There are two different tax credits available for two different types of heat pumps. One is for air source heat pumps and the other is for geothermal heat pumps. Air source heat pumps work kind of like a refrigerator by using electricity to either warm an area by moving warm air or cool an area by moving cool air. These systems are often used in moderate climates. Geothermal heat pumps work in a similar manner as air source heat pumps, except they use heat from the ground.
  
  

Amount

• The tax credit for an air source heat pump is 30 percent of the cost of the system up to $1,500. Geothermal heat pumps are assessed a tax credit of 30 percent of the entire cost with no cap.
  
  

Requirements

• In order to receive a tax credit, the air source heat pump must be installed in a taxpayer's principal residence and it must be an existing home. People who live in a newly constructed homes do not qualify for this credit. However, the credit for a geothermal heat pump can be claimed for new, existing, principal and second homes. Renters do not qualify for either credit.
  
  

Expiration

• The air source heat pump credit expires at the end of 2010, while the credit for the geothermal heat pump expires at the end of 2016.