The Inflation Reduction Act, adopted in August 2022, allows for a 30% tax credit for costs associated with ENERGY STAR qualified geothermal heat pumps installed in residences, as noted in section 25D of the Internal Revenue Code. The 30% credit applies to geothermal equipment placed in service through 2032.
Any geothermal equipment meeting ENERGY STAR requirements at the time of installation is eligible for the residential geothermal tax credit. The geothermal system must be installed in the United States in a home owned by the taxpayer. The tax credit applies for geothermal installations in new and existing homes.
The credit is equal to 30% of the eligible system costs, including the heat pump, ground loop field, etc. There is no limit to the number of times the credit can be claimed, so if the taxpayer has more than one home, the credit can be claimed for each home where geothermal equipment is installed.
In addition to the commercial and residential federal geothermal tax credit, numerous states, local municipalities, and utilities also offer rebates, tax incentives, and/or low interest loans to support your geothermal installation.
A list of incentives related to energy efficiency from provincial/territorial governments, major Canadian municipalities, and major electric and gas utilities is available by province at the Natural Resources Canada website.
If you purchased an ENERGY STAR qualified geothermal heat pump during the federal tax credit period, you may download the appropriate year's certificate for your records. This is purely for your records, and we recommend consulting a tax professional when claiming your credit.