If you’re in the market for a new heating and cooling system, you may be considering a geothermal heat pump as a good option for your home. Since the price of the system is higher than other types of HVAC equipment, homeowners want to know if there are geothermal tax credits currently available to help make the purchase more affordable. Grove Heating & Cooling explains if a federal geothermal tax credit exists for the installation of a geothermal HVAC system.
Current Geothermal Tax Credits for Homeowners
Geothermal tax credits have been around since 2005. You may have heard over the past few years that the benefit was being stepped down and due to be phased out by the end of 2023. Fortunately, geothermal tax credits have recently been extended for homeowners.
This past August, the Inflation Reduction Act of 2022 extended the residential energy-efficiency tax credits, including geothermal tax credits. Currently, there is a 30% federal tax credit for residential geothermal heat pumps installed by December 31, 2032, which can be applied retroactively to systems installed on or after January 1, 2022. The benefit will fall to 26% for qualifying heat pump installations performed in 2033, and lower to 24% for those installed in 2034. As of now, the geothermal tax credits are set to expire at the end of 2034.
Qualifying for Geothermal Tax Credits
Geothermal energy is one of the most efficient and environmentally friendly forms of energy available. This is why the US government offers geothermal tax credits to encourage homeowners to switch to a geothermal heating and cooling system. These credits can be applied to the cost of equipment and installation services.
In order to receive geothermal tax credits, there are a few eligibility requirements that must be met.
- The home where the geothermal system is installed must be located in the United States and the property must be used as your primary or secondary residence.
- The geothermal system must be used as a source of heating and cooling for the home, not solely to heat a pool or hot tub.
- The geothermal heat pump equipment must be new and meet ENERGY STAR efficiency requirements.
How Much Can You Save?
A geothermal heat pump is a type of HVAC system that uses the earth’s constant temperature to heat and cool your home. Geothermal heat pumps are among the most energy-efficient systems on the market, and they can save you up to 50% on your heating and cooling costs. However, the initial cost of installation can be prohibitive for some homeowners. The average geothermal heat pump system costs between $5,500 and $30,000 to install, although this price can vary depending on the size of your home and the type of system you choose.
Due to their high price, geothermal tax credits make geothermal heat pump systems more affordable for homeowners. By offering a tax credit to offset your tax burden, it reduces the upfront cost of geothermal system installation. In addition, the geothermal tax credits can be used in conjunction with other energy-efficiency tax credits, such as solar energy systems and small wind turbine tax credits, as well as those for energy-efficiency upgrades.
As a result, homeowners who install a geothermal heat pump system can potentially save thousands of dollars on their taxes. Check with your financial advisor to verify if your geothermal system installation will qualify you to receive geothermal tax credits and to determine the amount of your incentive.
Contact Grove Heating & Cooling to Install a Geothermal Heat Pump
If you’re in the market for a new HVAC system, geothermal is definitely something to consider. Geothermal systems are becoming more and more popular, thanks to their energy efficiency and the geothermal tax credits that can help homeowners save money on installation costs. If you’re interested in learning more about geothermal or want to schedule an estimate, be sure to call Grove Heating & Cooling.