Tax credits and rebates
Federal Tax Credits
The American Recovery and Reinvestment Act of 2009, H.R.1 (the Stimulus Bill of 2009) that was signed by the President on February 17, 2009, contains long-term tax incentives to encourage the installation of geothermal heat pumps in residences. The new law, effective January 1, 2009, offers a one-time tax credit of 30% of the total investment for geothermal heat pump installations―without the limit of $2,000 that was part of the law enacted in 2008.
It should be understood that a tax credit is generally more valuable than a tax deduction of the same magnitude because a tax credit reduces the tax obligation directly, while a deduction only reduces taxable income. Therefore the reduction in tax is only a fraction of the deduction.
While it is expected to take many months for the IRS to release the updated forms and instructions for filing to claim this credit, it is expected that the credit will be treated as a refundable credit, so they not only directly reduce the amount of tax payable, they could bring a taxpayer’s tax obligation into the negative.
A tax credit of 10% of the total investment is also available without a maximum credit limit for commercial installations.
Under the IRS rules, manufacturers need to certify that specific measures are eligible. Taxpayers should obtain a copy of this certificate (see below) when buying these products from the manufacturer, contractor or retailer. Certifications need not be submitted to the IRS, but should be kept on file in case the IRS has questions.
- Manufacturer's Certification Statement (PDF, 57 KB)
Federal, State, Local and Utility Incentives
- Energy Star rebates by state: These rebates are being funded with $300 million from the American Recovery and Reinvestment Act of 2009. Under this program, eligible consumers can receive rebates to purchase new energy-efficient appliances when they replace used appliances, and are in addition to the federal tax credit for geothermal installations. All EarthLinked geothermal heat pumps qualify.
- DSIRE is a comprehensive source of information on state, local, utility, and federal incentives that promote renewable energy and energy efficiency.
- Lookup by state
- U.S. Department of Treasury - Renewable Energy Grants
- Business Tax Credit – Commercial System
- Personal Tax Credit – Residential System
- GeoSmart Sustainable Financing Solutions. Developed to assure that contractors and manufacturers had a complete and simple to use financing platform in place that could fund the smallest energy efficient home improvement up to larger geothermal installations.
- ENERGY STAR. Offers businesses and consumers energy efficient solutions - helping to save money while protecting the environment for future generations. Energy Star is a voluntary labeling program of the U. S. Environmental Protection Agency and the US Department of Energy that identifies energy efficient products.
- Funding Opportunities. This SECO web site lists national funding opportunities for energy efficiency, energy conservation and renewable energy projects and initiatives.
- DOE's Financing Solutions & Incentives. Provides useful links to energy efficiency and renewable energy financing resources for homeowners, small business, industry, utilities, state and local programs, federal building, and international projects.
- U. S. Housing and Urban Development — Energy Efficient Mortgage Home Owner Guide. Additional information on an Energy Efficient Mortgage (EEM).
Tax Incentives Assistance Project (TIAP)
TIAP is sponsored by a coalition of public interest nonprofit groups, government agencies, and other organizations in the energy efficiency field, and is designed to give consumers and businesses information they need to make use of the federal income tax incentives for energy efficient products and technologies passed by Congress as part of the Energy Policy Act of 2005 and subsequently amended several times.
