How to Take Advantage of the Federal Tax Credit for GeoThermal Heat Pumps

Federal Tax CreditIf you’re thinking about replacing the home HVAC system, you know that a heat pump reduces annual cooling and heating bills by 30 to 40 percent. If you already enjoy this unique technology, you know how efficiently it operates. However, you might not be aware of the additional savings available through federal tax credits for geothermal heat pumps (GHPs).

Simple Qualifications

The Energy Improvement and Extension Act of 2008 expanded existing tax credits to include renewable energy initiatives and energy-efficient technologies including solar, wind and geothermal power. To qualify, your GHP must meet or exceed the requirements established by EnergyStar standards, and it must have been installed after December 31, 2007. The credit covers 30 percent of the purchase and installation cost of a heat pump system. These savings apply when you replace your current HVAC system, and they’re also available for new home construction and second homes. However, the credit doesn’t cover rental properties.

Filing the Form

Be sure to keep all documentation related to the purchase and installation of your GHP including the Manufacturer Certification Statement. This is your assurance that the new heat pump meets EnergyStar requirements. A sales receipt isn’t required by the Internal Revenue Service, but you’ll need it to determine the amount of your tax credit. Download IRS Form 5696, Residential Energy Credits, and simply calculate the savings. The form must be attached to your regular IRS filing, and its total belongs on line 52 of the standard 1040 form. Both ground loop and ground water GHPs are covered.

Good To Know

There are a few restrictions on this money-saving opportunity. The credit for geothermal heat pumps installed during 2008 is capped at $2,000. However, completed installations from January 1, 2009, through today receive the full 30 percent credit with no limit. Some components aren’t covered because they’re not considered essential to operation, so you can’t claim add-ons like duct work or emergency backup systems. Commercial properties are eligible for a 10 percent credit with no cap and subject to the same requirements as your home. It’s important to note that the program expires on December 31, 2016.

This valuable tax credit is another great reason to think about the advantages of a geothermal heat pump over traditional HVAC systems. While the initial cost is higher, that price is offset by substantial savings on home utility bills every year. It’s easy to take advantage of the generous energy tax credit, so talk with one of our HVAC professional about all the options. We can provide more detailed information and help you make smart choices that work for your home or business and your budget.

Max Mechanical Air Conditioning & Heating services the Dallas – Fort Worth – Arlington areas. Contact us online or call 817-459-4100 / 972-233-1637.

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