The 30% federal tax credit for geothermal heat pumps in the residential sector and the 10% credit for qualifying commercial geothermal installations has been reinstated. They are also retroactive to cover any installations done since the last Federal Tax Credit sunset in December 2016. The tax credits will remain in effect until December 31, 2019, at which point they’ll begin a phase-out. For 2020, the residential credit will move to 26% and in 2021 the final incentive will be 22%. In addition to the Federal Tax Credit, residential installations qualify for utility rebates from PSEG-LI of up to $2000 per ton.
• 30% of total system cost through 2019
• 26% of total system cost in 2020
• 22% of total system cost in 2021
• No limit to credit amount
• Can be used to offset AMT tax
• Can be used in more than one year
• Can be combined with solar and wind tax credits
• Can be combined with energy efficiency upgrade credits
How to claim the Credit
Use IRS Form 5695 to claim the Residential Energy Efficient Property Credit. For property placed in service after 2009 there’s no limit on the credit amount. The tax credit can be used to offset both regular income taxes and alternative minimum taxes (AMT). If the federal tax credit exceeds tax liability, the excess amount may be carried forward into future years. Spending on geothermal heat pump property adds to your home’s cost basis but also must be reduced by the amount of the tax credit received.