What is the federal geothermal ITC tax credit?
The federal geothermal tax credit is an opportunity for homeowners who install a geothermal heat pump system to claim 26% of the amount that they spent from their federal income taxes. The federal tax credit will decrease to 22% in 2023, so the sooner you install geothermal, the higher the tax credit that you can claim.
What are the eligibility requirements to qualify for the federal geothermal tax credit?
To benefit from the federal geothermal tax credit, you must still own the home in which the geothermal heat pump was installed and owe at least as much in taxes as you would claim for the credit.
If you owe less in federal taxes than you wish to claim for the credit, the remaining tax credit would roll over to the next years until claimed. You can claim the federal geothermal tax credit as many times as you have had geothermal installations.
How do I claim the federal geothermal tax credit?
Homeowners who have installed a working geothermal heat pump by the end of the year can claim their federal geothermal tax credit by simply declaring the amount that they spent on geothermal when filing their federal income taxes.
What expenses are eligible for the federal geothermal tax credit?
The federal geothermal tax credit applies to any and all expenses directly related to installing a geothermal heat pump in your home, including labor, onsite preparation, assembly, equipment, and piping costs. Unfortunately, any additional expenses and components that are not directly associated with geothermal installation, such as ductwork installation, do not qualify for the tax credit.
Are there any other financial incentives other than the federal geothermal tax credit?
Yes, and you can take advantage of as many of these incentives as apply to your installation! Depending on where you live, your state government or local utilities provider may also offer financial incentives to upgrade to geothermal, such as rebates and discounts. These local financial incentives often vary widely by location, so it is best to contact these organizations directly with questions.
Find out more up-to-date information about the federal geothermal tax credit on our blog.