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Residential Energy-Efficient Property Credit
The Bipartisan Budget Act of 2018, signed in February 2018, reinstated the tax credit of geothermal heat pumps to § 25D of the Internal Revenue Code.
The property credit provides 30% for systems placed in service by 12/31-2019, 26% between 12/31/19 and 1/1/2021 and 22% between 12/31/2020 and 1/1/2022. Significantly, The American Recovery and Reinvestment of 2009 repealed a previous limitation on the use of the credit for eligible projects are also supported by “subsidized energy financing.” For projects placed in service after December 31, 2008, this limitation no longer applies.
Eligible Geothermal Heat Pump Property
(i) Uses the ground or groundwater as a thermal energy source to heat the dwelling unit or as a thermal energy sink to cool the dwelling and,
(ii) Meets the requirements of the Energy Star® program which are in effect at the time the expenditure for such equipment is made.
Note: Labor costs properly allocated to the installation of the geothermal heat pump property and for any associated piping, wiring, and interconnecting ducting are also included.
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.
For more details click here.
Additional State and Local Geothermal Energy Tax Incentives Available
Your state and local governments may also offer incentives for installing a ClimateMaster geothermal heating and cooling system. Visit the DSIRE Website shown below to find out if there are state and local residential energy tax credits available in your area..
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.