Geothermal Tax Credits
Please verify the following information with your tax preparer. We will provide all the documents you need.
Continuing into 2011, there is a federal tax credit for 30% of the installed cost of a geothermal system for your primary or secondary residence, with NO cap. Plus, there is a very generous APS rebate as well. These 2 incentives make geothermal affordable for most homeowners.
Please Note: . Geothermal Heat Pump systems .. AND .. Solar Hot Water systems qualify for entirely separate tax credits and utility rebates which do not affect the standard home efficiency tax credits … (CALL US FOR MORE INFO).
A complete list of qualifying improvements can be found at www.energystar.gov
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Geothermal Heat Pump systems – 30% of cost (no cap) & a large APS rebate
Solar Hot Water systems – 30% of cost with no cap (plus AZ credit & APS rebate)
A/C (EER 12, SEER 16), Heat Pump (EER 12, SEER 15) – up to $300
Furnaces 95% AFUE or Higher — up to $300
Rooftop Package systems (EER 12, SEER 14) — up to $300
Tankless Hot Water Heaters – Energy Factor 0.82 — up to $300.
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Frequently Asked Questions
What are the qualifying criteria for residential equipment to get these tax credits?
Revised criteria for qualifying residential HVAC equipment under Section 1121 of the ARRA legislation.
1. A natural gas, propane, or oil furnace rated at 95.0% AFUE or higher.
2. Any furnace with a main air circulating fan that uses no more than 2% of the furnace total energy use.
3. A central air conditioner that achieves the 16 SEER or higher, 13 EER or higher rating.
4. An air source heat pump that achieves 15 SEER or higher, 12.5 EER or higher, 8.5 HSPF or higher rating.
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What’s the difference between a tax credit and a tax deduction?
A tax credit applies directly against the taxpayers’ liability. A tax deduction applies against a taxpayer’s income, lowering the adjusted gross income and possibly moving the taxpayer to a lower tax bracket. Tax credits have a greater benefit to a taxpayer than a tax deduction. There are two categories of tax credits: Refundable and Non-Refundable. Residential Energy Tax Credits for 2009 and 2011 are considered to be Non-Refundable tax credits under the IRS regulations, just as the previous tax credits were for 2006 and 2007.
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What is the difference between Non-Refundable and Refundable Tax Credits?
Most, but not all, tax credits are referred to as non-refundable credits. A non-refundable credit is a tax credit that can reduce your tax liability to zero (0), but not below. You must have tax liability on line 46 of Form 1040, line 18 of Form 1040A, or line 43 of Form 1040NR to claim a non-refundable tax credit. A refundable tax credit is a tax credit that can reduce your tax liability below zero (0). Because it is possible to receive a refund based on these types of credits, the credits are referred to as refundable..
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Can a homeowner claim $300 in tax credits for improvements made in 2010, and then again claim tax credits for more improvements made in 2011?
No, a TOTAL of $300 in tax credits is for improvements made over the combined two year period.
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Can a homeowner use the $300 tax credit towards a single appliance installation?
Yes, since the per appliance caps have been removed by this new legislation, a homeowner may use the entire $300 in tax credits for installing a single qualified appliance, such as a furnace, air conditioner, heat pump, etc. up to 30% of the installed cost of that one appliance.
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Do the tax credits apply to the cost of the equipment or equipment plus labor?
The tax credit applies to the installed cost of the equipment that qualifies for the tax credits, which includes labor for that specific installation.
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Can a homeowner claim credits for improvements to a second home, such as a vacation home?
Geothermal, the tax credit is available for the taxpayer’s primary residence & second home. Solar systems, the tax credit is available for the taxpayer’s primary residence & second home. Central air systems, the tax credit is only available for the taxpayer’s primary residence.
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Do “Energy Star” Certified products meet the requirements for the 2010 HVAC Stimulus?
Because there are different equipment definitions and product tiers used by the “Energy Star” program, note that most “ENERGY STAR” products do meet the criteria for these tax credits, but not all of them do.
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What other types of energy efficiency improvements qualify for the tax credits?
Homeowners may be able to qualify for the tax credits if they make qualified improvements to windows and doors including skylights, storm windows and storm doors; roofing including metal and asphalt roofs; and insulation. All of these improvements qualify, but homeowner may only claim $300 in total for any improvements. The exception to this is for geothermal heat pump and solar applications and installations, where there is no limit on the tax credit amount.
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How do homeowners claim the tax credits and receive their money?
Before filling for tax credits on any listed models, it is always recommended that homeowners/consumers consult with a tax professional to review the provisions of the “American Recovery and Revitalization Act of 2009″ (ARRA) in reference to Section 25C of the Internal Revenue Code. Previously, the IRS has directed taxpayers to use Form 5695, Residential Energy Efficient Property Credit. Taxpayers should keep copies of invoices and receipts to document their actual expenditures, but only need to file Form 5695 with their tax returns to get the tax credits.
