Federal Tax Credits for Geothermal

Federal Tax Credits for Geothermal

Recently I had a meeting with a Portland based landscape architect to talk about sustainable architecture and how the Geothermal heat exchanger could potentially be integrated. One of the questions he asked, I had to research. He asked, “How exactly does the tax credit work for Geothermal systems? Does the government pay the company for 30% of the install? Or in April, when you file your taxes, do you get a refund for 30% of the cost?”

What I knew for sure was that when you install a GHP system in your home, you as the homeowner get a 30% tax credit, but what were the details and what was filing for the credit actually like? Onward I explored!

I didn’t have to go far to get a good answer. I asked my boss, Nick Cabianca of Geonomic Developments to explain the details about tax credits and rebates. Nick explained, “Geothermal systems qualify for the Federal Renewable Energy Tax Credit, or FRETC. It is a dollar for dollar tax credit for homeowners that is in place through the end of 2016. The homeowner is able to take the credit all in one year or can spread the credit over as many as 5 years. There is also no cap on the incentive amount for Geothermal heat pumps.”

He directed me to take a look at the IRS’ more detailed breakdown www.irs.gov to see exactly what form gets used.

IRS Form 5695: Figuring the 30%

If you are filing a 1040 and itemizing your deductions, you will use form 5695, Residential Energy Credits. This is where you figure 30% of the total cost of installing Geothermal in your home. Your system must meet Energy Star criteria. Cabianca explained that in addition your installer “will need to provide you an AHRI equipment certificate and detailed invoice to submit along with your tax returns.”

Once you calculate what 30% of the total is, take that number and write it on line 52 of form 1040, this section is Taxes and Credits. It gets added up with your other deductions and subtracted from the taxes you would owe, possibly coming back in the form of a sizeable return check!
Cabianca added, “depending on the location of your home, there may be local utility and some additional State incentives as well.”

Think I’ll save those goodies for my next blog post!

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