GEOTHERMAL TAX CREDIT IS BACK!!!
In February 2018, the 30% geothermal federal tax credit was reinstated through 2019 and can be retroactively applied to installations placed in service on January 1, 2017 or later. Property is usually considered to be placed in service when installation is complete and equipment is ready for use. However, of the system is part of the construction or renovation of a house, it’s considered placed in service when the taxpayer takes residence in the house. To save the most on your installation, you’ll want to act quickly – this credit is set to decrease each year through 2021 with the amount dropping to 26% in 2020 and 22% in 2021.
* 30% of total system cost through 2019
* 26% of total system cost in 2020
* 22% of total system cost in 2021
* No limit of credit amount
* Can be used in more than one year
* Can be combined with solar, wind and energy efficiency upgrade tax credits
Geothermal equipment that uses the stored solar energy from the ground for heating and cooling and that meets ENERGY STAR requirements at the time of installations is eligible for the tax credit. Covered expenditures include labor for onsite preparation, assembly, or original system installation and for piping or wiring to connect a system to the home. The structure must be located in the United States and used as a residence by the taxpayer, although primary residency isn’t required. In fact, if geothermal is installed in more than one home, there’s no limitation on the number of times the credit can be claimed.
The credit CAN NOT be claimed for spending on equipment used solely for hot tub or pool conditioning, nor on previously used equipment. Rental home installations also CAN NOT be claimed. Electric heat strips and ductwork distribution systems are no longer included in the 30% calculation.
How to claim:
Use IRS Form 5695 to claim the Residential Energy Efficient Property Credit. For property placed in service after 2009 there’s no limit on credit amount. The tax credit can be used to offset both regular income taxes and alternative minimum taxes (AMT). If the federal tax credit exceeds tax liability, the excess amount may be carried forward into future years. Spending on geothermal heat pump property adds to your home’s cost basis but also must be reduced by the amount of the tax credits received.
***Please consult your financial advisor to verify***