Many homeowners wish they had the money to purchase the most energy-efficient heating and cooling system available to them, a geothermal system. The federal government, however, is still offering generous tax incentives to defray this cost, in order to encourage energy efficiency. Until the end of 2016, you can claim a 30 percent tax credit on purchase and installation of a geothermal system. This credit is different from a tax deduction, and can be claimed as long as the qualifying system is installed in connection with a new or existing dwelling used as a residence by the taxpayer in question.
Combined with substantial savings on monthly utility bills, the federal tax credit brings geothermal heating and cooling into an affordable range for many homeowners.
The tax credit applies to any qualified HVAC system that:
- Utilizes the ground or ground water as an energy source to heat and cool the home.
- Meets the federal Energy Star program requirements.
Even if your residence is not your primary residence, the credit may still apply to a second residence. It covers all labor costs and materials used to install the geothermal heat pump on your property.
That’s not all; with the tax credit, you can offset both your regular income taxes as well as alternative minimum taxes. What about income liability? Not a problem; if the tax credit exceeds it, the remaining balance will be carried forward for future years.
How to Claim
For systems installed after January 2009, use Form 5695. If your system was completed after that, there’s no limit on the credit amount available, and you can use the credit to offset both regular income taxes along with alternative minimum taxes (AMT).
For more information on geothermal systems in the Dayton area, please contact us at Ace Hardware Home Services today.
Our goal is to help educate our customers in Dayton, Ohio about energy and home comfort issues (specific to HVAC systems). For more information about geothermal systems and other HVAC topics, download our free Home Comfort Resource guide.
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