The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, extends the federal tax credit for geothermal heat pump installations through 2023. Residential credits will remain at 26% of the total installation cost through 2022, stepping down to 22% in 2023. The credits will expire on January 1, 2024.

Credits for commercial installations will remain at the current level of 10% through 2023. The new law also makes permanent the Section 179D Energy Efficient Commercial Buildings Deduction of the federal tax code, affording substantial financial benefit for commercial building owners.

Eligible Geothermal Heat Pump Property

• Home must be located in the U.S.
• Does not have to be your main home
• Includes “dwelling unit” defined as a house, apartment, condominium, mobile home, boat or similar property, and all structures or other property appurtenant to such dwelling unit
• Geothermal heat pump must be Energy Star® qualified
• Installed between 1/1/2017 and 12/31/2023

Learn more here: Federal Tax Incentives – Expires January 1, 2024

Placed in Service Requirement

The IRS defines “placed in service” as when the property is ready and available for use. It’s not when you purchase the product, but the day the installation is complete, and you are able to use your new product.

Claiming the Credit

IRS Form 5695 is used to claim the Residential Energy Credit. Links to the form and pertinent reference documents are below:

• About Form 5695
• IRS Form 5695 Instructions
• IRS Form 5695
• Manufacturer’s Certification of Geothermal Heat Pump Property Compliance (ClimateMaster)
  

Additional State and Local Geothermal Energy Tax Incentives Available

Check with your your state and local governments! There may be additional incentives for installing a ClimateMaster geothermal heating and cooling system. Visit the DSIRE Website (link below) shown below to find out if there are state and local residential energy tax credits available in your area..

NOTE: Once you reach the DSIRE Website, simply select “Geothermal Heat Pumps” from the “Technology” drop down menu and then click on your state to view all the programs or energy credits available for geothermal heat pumps in your state.