The Latest Geothermal Tax Incentives

  • February 16, 2023
  • By MR COOL

Many green energy systems allow you to claim tax credits, rewarding you for investing in renewable energy. One of the green energy options that may qualify you for tax credits is geothermal.

Geothermal heat pumps are highly efficient, using refrigerant to move heat between the inside of your home and the outside. If you’re interested in taking advantage of geothermal tax credits, here’s a quick guide to help you get started. 

Current Geothermal Tax Incentives

There are several tax credits for geothermal energy available to homeowners. These tax credits differ depending on when your geothermal system is installed. Overall, homeowners can expect a significant tax incentive on their geothermal systems for several years to come.

The current geothermal heat pump tax incentives are broken down as follows:

  • 30% for property installed between December 2016 and January 2020
  • 30% for property installed between December 2021 and January 2033
  • 26% for property installed between December 2019 and January 2022
  • 26% for property installed between December 2032 and January 2034
  • 22% for property installed between December 2033 and January 2035

This incentive timeline is for homes installing new geothermal heat systems, which helps encourage the installation of modern, efficient geothermal heat pumps in homes. A geothermal tax credit extension occurred in August 2022 to motivate homeowners and increase the number of homes using green energy throughout the United States.

Who Qualifies for the Geothermal Tax Credit?

If you install your geothermal system before December 31st, 2034, you’ll qualify for the geothermal tax credit. The amount you’ll be eligible for will depend on the exact date you had your system installed, but you’ll receive some type of credit as long as you install your system before the end of 2034.

Whether you have an existing home or are building a new property, your space will qualify as long as it is a residential home. This includes primary and secondary residences — so if you have two houses with geothermal heat pumps, they can both qualify. As long as your home is in the United States and isn’t a rental, it should qualify for the geothermal credit.

What Systems Qualify for the Geothermal Tax Credit? 

There are also specific requirements for installation outside of the installation date, including the type of system you install and where it sources its energy.

Your geothermal heat pump must be Energy Star-certified to ensure it meets the correct efficiency standards. Products that meet these standards come with an “Energy Star certified” label to let you know they meet Energy Star criteria.

All Energy Star-certified geothermal heat pumps are eligible for the tax credit. While finding an Energy Star-certified heat pump is essential for qualifying, you also want to ensure you have a high-quality heat pump that will meet your household’s energy needs.

You can explore the Energy Star website to find certified products for your home. These products are rated for their efficiency and environmental consciousness, making them ideal for homeowners looking to cut their energy bills and take advantage of energy tax credits. Compare different models to find one that fits your needs, budget and style and ensures you can capitalize on energy-efficient savings.

Additionally, your system needs to use the ground or groundwater to thermally cool or heat your home. Without this capability, you aren’t using your geothermal system to its maximum energy efficiency.

Overall, make sure you’re using an Energy Star-certified system that uses the ground or groundwater for your heating and cooling needs so you can qualify for the credit.

How Does the Geothermal Tax Credit Work?

The geothermal tax incentive falls under your non-refundable tax credits that you apply to the total tax amount you owe to the IRS. The credit helps reduce the amount you owe at the end of the tax year.

Because it’s a non-refundable credit, you can’t receive the refund if the amount is more than what you owe in taxes. However, you can split the credit over multiple years to help lower what you owe until you’ve used the entire tax credit amount. This way, you get the full benefit of the energy tax credit, no matter your circumstances or income.

Once you’ve installed your geothermal heat system and it’s time to file your taxes, you need to fill out IRS Form 5693, Residential Energy Credits. Follow the instructions on the form or talk to a tax professional to ensure you successfully get your energy tax credit.

Other Environmental Tax Incentives

Homeowners looking to maximize their tax credits should consider upgrading other home systems to meet green energy standards. Installing additional energy-efficient options in your home will save you money and increase your potential tax credit.

Some home improvements that may qualify include:

  • Heat pump water heaters
  • Doors and windows
  • Insulation
  • Home energy audits
  • Electrical panel upgrades

You might be able to dramatically increase your energy tax credit total when you invest in energy efficiency. These upgrades lower the taxes you owe and cut your energy bills over time. The more efficient your home systems, the less energy they use and the lower your energy expenses.

Geocool® Geothermal Heat Pumps

The Geocool® series of geothermal heat pumps provide homeowners with all the comfort and convenience of a traditional heat pump but with eco-friendly operation. All Geocool® models are compact, quiet and easy to install. With horizontal and vertical options available, you can find the right size and fit for your home.

Thanks to non-depleting R410A and chlorine-free refrigerant, you can enjoy superior efficiency, significant energy bill savings and a comfortable home year-round.

Get Energy-Efficient HVAC Systems From MRCOOL

Upgrading to a geothermal heat pump can give you the comfort and cost savings you’ve always wanted at home. Enjoy efficient, lasting heating and your energy tax credits with a high-quality geothermal heat pump from MRCOOL.

Our HVAC products are durable, lasting and built to keep you comfortable. Whether you’re interested in geothermal heat or want something different, we’ve got you covered.

Contact us to learn more about our available HVAC systems. If you want to make the switch to geothermal energy, use our locator to find a qualified dealer near you.

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