Clearing up confusion over the Geothermal Tax Credit
The 30% tax credit for residential geothermal heat pump (GHP) systems is good until December 31, 2016.
For technical language for tax professionals, see:
- Public Law 110-343 (the October 3, 2008 “Bailout Bill”) Division B Title I Subtitle A Section 106 (a) and (d)
- Public Law 111-5 (the February 17, 2009 “Stimulus Bill”) Division B Title I Subtitle B Part I Section 1122
The reason there is confusion about the GHP tax credit is that up until the Bailout Bill, GHPs were in the same category as conventional HVAC equipment covered under Section 25(C) of the Internal Revenue Code, and those tax credits expire the end of this year unless Congress extends them. However, the Bailout Bill moved GHPs from IRC Section 25(C) into Section 25(D) where all the other “renewable energy” tax credits are located (solar, wind, etc.), and those tax credits last until 2016.
For additional information, go to the Energy Star tax credits web page where they first show the 25(C) credits, and then below that show the tax credits for GHPs, wind and solar.
Additional clarification is offered by IRS Form 5695, where GHPs were moved from Part I (Non?business Energy Property Credit) to Part II (Residential Energy Efficient Property Credit) line 15. While this form doesn’t mention the expiration date of each category, it does point out that GHPs are not in the same category as conventional HVAC equipment. The IRS has also clarified this issue.
ClimateMaster has also done an excellent job of detailing all of this in their Guide to Federal Tax Incentives for Residential Geothermal Heat Pumps.