Geothermal Tax Credit and Incentives
Many homeowners do not realize there are geothermal tax credit and incentives associated with installing eco-friendly heating and cooling systems.
In December 2020, the tax credit for the installation of a geothermal heat pump was extended through 2023. The tax credit for all technologies now features a gradual step down in the credit value.
26% Tax Credit for Geothermal and Solar
A taxpayer may claim a credit of 26% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the “placed in service” date is the date of occupancy by the homeowner.
Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year.
Geothermal Heat Pumps Tax Credit and Incentives
- 26% for systems placed in service by December 2022
- 22% for systems placed in service by December 2023
- The geothermal heat pump must meet federal Energy Star criteria
- The home served by the system does not have to be the taxpayer’s principal residence
- Consult a tax professional for more details
- Read more here: https://www.energystar.gov/about/federal_tax_credits/renewable_energy_tax_credits
- Check for more local incentives here: https://www.dsireusa.org
