Show me the money! (How the geothermal tax credit works)

After spending hours trolling various websites, two phone calls, one to EnergyStar and one to the IRS, I have finally confirmed that the 30% tax credit applies to the installation of the ENTIRE system NOT just the heat pump. That will amount to about $7,800 of awesomeness come February 2013 when I do our taxes.

My original hunt for verifiable information made it obvious that finding a definitive answer to the question “What does the 30% tax break apply to?” was not going to be easy. Some websites use language that indicate the whole installation is eligible for the tax break, some are very specific in their mention of the “heat pump” when referring to the tax break. EnergyStar’s Federal Tax Credits for Consumer Energy Efficiency page has in small print on a secondary page that installation is included. I decided to be that annoying person who calls with a question that is already answered for them. The conversation went like this:

Me: “Hello, I was just calling to confirm that the 30% tax credit for geothermal systems includes the installation costs and not just the heat pump.”

EnergyStar Man: “Yes, that includes the whole system.” 

Me: “I saw that on your website but just wanted to clarify that it includes the loops, digging, excavation and all the other things that go along with installing the system.”

EnergyStar Man: “Ummmmmm…I think, but you should call the IRS just to make sure.”

Me: “Ummm, okay, so how do I do that…just call up the IRS?”

EnergyStar Man: “Yes and they will be able to tell you specifically what is eligible.” 

I am sure this conversation would drive the hubby crazy because he hates that I ask too many questions. He really hates it when I ask questions that we seemingly already know the answer to, but I like to be super thorough when dealing with insurance, realtors, banks, loans, purchases of really expensive products and directions when lost in the middle of NYC. So I called the IRS. After an extended wait and about 7 holds I was put through to Mrs. Sneed (sidenote: perfect name for an IRS agent). She asked me about 30 questions, which included “Is the house in the United States?” and “Will you be using this system to heat a pool or hot tub?” (There was an awkward pause when I answered “I wish.”)

To sum up her 30 questions:

  • you must own the home where you are installing geothermal (and it must be in the US)
  • you CANNOT be receiving any other subsidies or credits from your local government or other entities
  • the system must be EnergyStar approved
  • you must be heating your house, not a pool or hot tub
If you meet all of these requirements and are installing it in 2012 you are eligible for the 30% tax credit and that covers the ENTIRE cost of the installation and materials. The other awesome thing about the credit is that you can split it up if needed. For example, if when I do our taxes in February we owe less than what the credit is, we can carry over the difference to 2013 tax return. I think that is how she explained it. I suggest calling the IRS to confirm if you are thinking of installing a geothermal system just to be sure :).

4 thoughts on “Show me the money! (How the geothermal tax credit works)

  1. This is fascinating. I love reading through what you’re doing. We’re only at the fetal stages of home renovation (I hung picture frames today and tonight we’ll paint!).

  2. That should be in really nice keeping with the farmhouse. We haven’t picked out indoor paint yet–we just finished painting our side porch, which apparently has never been painted. It would be fantastic if the dog would stop putting his muddy paws on the railing…

    • In my experience it is easier to accept the dog’s indiscretions then to try to change them. Of course the hubby would advocate for training classes if we had to do it all over again :).

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