Geothermal Tax Credits

Governments see that there are advantages in both the environmental and fiscal impacts of geothermal. As a result, there are many incentives and rebates being offered on the purchase of a geothermal heating and cooling system.

The Energy Credit

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, if 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. A credit of 10% of the total investment is also available (no maximum) for a commercial system installation.




What's Eligible

To qualify, the systems must meet or exceed EnergyStar requirements and be installed after December 31, 2021. Check if your unit qualifies with our compliance certificate. 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 installation 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.


What's NOT Eligible

The credit can’t be claimed for spending on equipment used solely for hot tub or pool conditioning, nor on previously used equipment. Rental home installations also cannot be claimed. As of November, 2013, electric strip heat and ductwork distribution systems are no longer included in the 30% calculation.


How to claim the credit

Use IRS Form 5695 to claim the Residential Energy E cient Property Credit. For property placed in service after 2009 there’s no limit on the credit amount. The tax credit can be used to o set 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 credit received.

Canadian Geothermal Tax Credits

Although most federal government incentives have ended, Canadian provinces, territories, and municipal entities are still offering incentives for installing geothermal systems. For a list of financial incentives by Province, visit: geo-exchange.ca – under the "Information Center" tab, click on the "Financial Support and Grants" link to see which incentives best fit your needs.

Even without government incentives, geothermal is still the way to go. GeoStar units are great for the environment and your wallet – tax credit or not, you'll still see great savings.