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Tax Credits for Geothermal Installations: Still in Place Even as Other Incentives Expire

Posted on December 17, 2013

Wichita homeowners considering making a switch to geothermal energy should act soon to take advantage of federal tax credits. The tax credits for geothermal installations can help to significantly defray the cost of a new system, if installed by the end of 2016. Savings on operating costs are also considerable. As EnergyStar.gov notes, geothermal heat pumps “are over 45 percent more energy efficient than standard options.”

We’ve previously discussed the retroactively reinstated 25C energy tax credits, which expire at the end of this year. Those are the 10 percent (of installed cost) credits for certain energy-efficient heating and cooling equipment and home improvements done by the end of 2013.

Energy-conscious homeowners will be happy to know that tax credits for geothermal installations are even more generous. Ground source geothermal heat pump systems are eligible for a credit of 30 percent of the cost with no cap, until December 31, 2016. Geothermal installations in new or existing homes and both a principal residence and/or second or vacation home qualify.

Geothermal Heat Pump Credit Details

It’s worth noting some of the details of this geothermal incentive. First of all, it’s a tax credit rather than a deduction. Secondly, this credit amounts to 30 percent of the entire installed system—not just the heat pump itself. Associated materials like piping, wiring and ducts are included, as is labor to handle the installation. Qualified geothermal heat pump property is defined as equipment that:

  1. Uses the ground or ground water as a thermal energy source to heat the dwelling unit or as a thermal energy sink to cool the dwelling unit, and
  2. Meets the requirements of the Energy Star program in effect at the time the equipment is installed.

The Energy Star requirements currently in effect include detailed minimum performance and energy efficiency ratings for each specific type of equipment. Standards differ depending on whether the installation is closed loop or open loop and other factors. Consult an experienced geothermal installer to choose a compliant heat pump.

To learn more about geothermal energy and tax credits for geothermal installations, contact the experts at Comfort Systems.

Our goal is to help educate our customers in Wichita, Kansas about energy and home comfort issues (specific to HVAC systems).  For more information about tax credits and other HVAC topics, download our free Home Comfort Resource guide.

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