| Geothermal heat pumps are durable and require | | | | passed in October 2008, a residentialsystem |
| little maintenance. They have fewer mechanical | | | | installed and placed in service anytime between |
| components than other systems, and most of | | | | January 1, 2008 and December |
| those components are underground, sheltered | | | | 31, 2016 was eligible for a tax credit equal to 30 |
| from the weather. The underground piping used in | | | | % of the installed cost of the system upto a cap |
| the system is often guaranteed to last 25 to 50 | | | | of $2000 for a single residence. |
| years and is virtually worry-free. The components | | | | The Stimulus Bill signed recently by President |
| inside the house are small and easily accessible for | | | | Obama improves that tax credit. |
| maintenance. Warm and cool air is distributed | | | | Specifically, systems placed in service after |
| through ductwork, just as in a regular forced-air | | | | January 1, 2009 are no longer subject to thecaps. |
| system. | | | | As a result, an installed system now is eligible for |
| Since geothermal systems have no outside | | | | a 30% tax credit of the totalinstalled cost of the |
| condensing units like air conditioners, they are | | | | system. In addition, if the taxpayer can’t use |
| quieter to operate. | | | | the credit in the yearthe system is installed, he or |
| How Do They Work? | | | | she can carry any unused credit into the next tax |
| Remember, a geothermal heat pump doesn't | | | | year. |
| create heat by burning fuel, like a furnace does. | | | | Some key dates to keep in mind: |
| Instead, in winter it collects the Earth's natural | | | | • If you installed a system and placed it “in |
| heat through a series of pipes, called a loop, | | | | service” anytime in 2008, youare entitled to a |
| installed below the surface of the ground or | | | | tax credit equal to 30% of the cost of the |
| submersed in a pond or lake. Fluid circulates | | | | system subjectto a cap of $2000 for a single |
| through the loop and carries the heat to the | | | | family. |
| house. There, an electrically driven compressor | | | | • 2009 installations are not subject to the cap. |
| and a heat exchanger concentrate the Earth's | | | | Other provisions of the residential credit remain |
| energy and release it inside the home at a higher | | | | the same: |
| temperature. Ductwork distributes the heat to | | | | 1. The system must meet Energy Star |
| different rooms. | | | | requirements in effect at the time thesystem is |
| In summer, the process is reversed. The | | | | completed. |
| underground loop draws excess heat from the | | | | 2. The system must be in the taxpayer’s |
| house and allows it to be absorbed by the Earth. | | | | residence but is not limited to theprimary |
| The system cools your home in the same way | | | | residence. |
| that a refrigerator keeps your food cool - by | | | | 3. There are no specific requirements for the |
| drawing heat from the interior, not by blowing in | | | | invoice. However, it will behelpful if the invoice |
| cold air. | | | | states "Geothermal Heat Pump" and that it |
| The geothermal loop that is buried underground is | | | | "Exceedsrequirements of Energy Star program |
| typically made of high-density polyethylene, a | | | | currently in effect" on it. |
| tough plastic that is extraordinarily durable but | | | | 4. The taxpayer has to file the Form 5695 to |
| which allows heat to pass through efficiently. | | | | receive the credit. |
| When installers connect sections of pipe, they | | | | There is a special rule for Condos; |
| heat fuse the joints, making the connections | | | | In a typical condo, the owners contribute to the |
| stronger than the pipe itself. The fluid in the loop | | | | upkeep by paying money to acondominium |
| is water or an environmentally safe antifreeze | | | | management association. If the association puts in |
| solution that circulates through the pipes in a | | | | qualifying equipment,each member of the |
| closed system. | | | | association can claim the residential tax credits on |
| Another type of geothermal system uses a loop | | | | his or her taxesfor his or her share of the |
| of copper piping placed underground. When | | | | spending. The condo has to be "substantially used |
| refrigerant is pumped through the loop, heat is | | | | asresidences." |
| transferred directly through the copper to the | | | | Last, in most cases, a condo association is not a |
| earth. | | | | taxable entity. The individual unitholders would be |
| | | | | the ones that can benefit from a tax credit. |
| | | | | |
| As with any heat pump, geothermal and | | | | Geothermal Tax Credits |
| water-source heat pumps are able to heat, cool, | | | | An exciting new tax credit is now available for |
| and, if so equipped, supply the house with hot | | | | home and commercial building owners who install |
| water. Some models of geothermal systems are | | | | geothermal heating and cooling systems through |
| available with two-speed compressors and variable | | | | the Energy Improvement and Extension Act of |
| fans for more comfort and energy savings. | | | | 2008 (H.R. 1424). H.R. 1424 offers a onetime tax |
| Relative to air-source heat pumps, they are | | | | credit of 30% of the total investment for |
| quieter, last longer, need little maintenance, and do | | | | homeowners who install residential ground loop or |
| not depend on the temperature of the outside air. | | | | ground water geothermal heat pumps.. A credit of |
| US Department of Energy | | | | 10% of the total investment is also available (no |
| Residential Geothermal Tax Incentives | | | | maximum) for a commercial system installation. |
| 30% of total GHP system cost | | | | To qualify, the systems must meet or exceed |
| Credit limited to $2000 for 2008 | | | | EnergyStar requirements and be installed after |
| No limit to credit amount for 2009 to 2016 | | | | December 31, 2007. While units installed in 2008 |
| Can be used to offset AMT tax | | | | are subject to a $2,000 cap on the credit, units |
| Can be combined with solar and wind tax credits | | | | installed from 2009 through 2016 can take |
| Can be used in more than one year | | | | advantage of the full credit. Owners can file for |
| Eligibility: | | | | the credit by completing the Renewable Energy |
| Home must be located in the U.S. | | | | Credits subsection on their tax return forms for |
| Includes houses, apartments, condos, mobile | | | | 2008. For taxpayers that are subject to the |
| homes | | | | Alternative Minimum Tax, they can claim the |
| Does not have to be your main home | | | | credit on their taxes for the following year. No |
| GHP must meet Energy Star requirements | | | | proof of purchase will be required; however, in |
| Installed between 1/1/2008 and 12/31/2016 | | | | case of an audit, owners are encouraged to keep |
| | | | | a detailed invoice of their purchase on file. The |
| | | | | contractor who sold and installed the product |
| Commercial Geothermal Tax Incentives | | | | should list the purchase as a "Geothermal Heat |
| 10% of total GHP system cost | | | | Pump" on the invoice and that it "Exceeds |
| No limit to total credit amount | | | | requirements of Energy Star program currently in |
| Can be used to offset AMT tax | | | | effect". |
| Can be combined with solar and wind tax credits | | | | The tax credit is available through December 31, |
| Can be used in more than one year | | | | 2016. Consult your local tax professional for |
| 10% grant available in lieu of tax credit | | | | advice on taking advantage of the tax credit, as |
| Accelerated Depreciation: | | | | this announcement is not intended as a |
| 5 year MACR depreciation for entire GHP system | | | | recommendation or endorsement of any financial |
| Eligible for 50% first-year bonus depreciation for | | | | strategy. |
| 2008 - 2009 | | | | Download the brochure: Understanding the Federal |
| Eligibility: | | | | Tax Incentives |
| Building located in U.S. | | | | Helpful Resources |
| Original use begins with taxpayer | | | | - Excerpt from the Energy Improvement and |
| Installed between 10/3/2008 and 12/31/2016 | | | | Extension Act pertaining to geothermal. |
| | | | | - IRS Form 5695*: Residential Energy Efficient |
| | | | | Property Credit |
| | | | | - More Information about the "Residential |
| Recent Congressional legislation has improved the | | | | Renewable Energy Tax Credit" |
| tax credit for installation of residentialheat pumps. | | | | - Find additional tax incentives that may be |
| With the new laws, a residential customer who | | | | available in your state - |
| installs a residentialgeothermal heat pump may be | | | | Consult your tax professional for details. |
| eligible for a tax credit of 30% of the installed | | | | *Form 5695 for the 2009 tax year are not yet |
| cost of thesystem, no cap. | | | | available. |
| As part of the economic rescue bill (HR 1424) | | | | |