What You Should Know About Geothermal Heat Pumps Tax Credits
Geothermal heat pumps are similar to the ordinary heat pump systems, with the only major difference being that the geothermal systems use the ground to provide heating and air conditioning as opposed the ordinary heating systems that use outside air. This makes the geothermal systems more efficient and more comfortable, and therefore a 30% tax credit of the cost – which includes installation as well as labor costs – is usually charged with no upper limit.
If you are a house owner, amounts that are spent on its improvements are added to the tax basis of the house. A smaller tax basis implies that there will be a smaller taxable gain when you decide to sell the house in future. But if you invest in a geothermal heat pump in your home, it is going to add to the tax basis and therefore you will need to reduce it by the amount of tax credit you will receive. If you have a property that serves a dual purpose, for instance an office and a home, the expenditure may need to be allocated between business use and the residential. If you spend about 80% and above on the residential, all the spending will qualify for residential credit, but there will still be tax credit of about 10% available for business use.
Geothermal heat pump tax credits may be claimed for spending on what can be referred to as qualified heat pump property that is installed in connection with either a new or existing dwelling location that is used as residence by the taxpayer. The dwelling does not necessarily have to be the primary residence. Qualified geothermal heat pump property simply means an equipment that utilizes the ground or ground water as the source of geothermal energy for heating the residential area or for air conditioning. The equipment should be compliant with the requirements of the energy star program that are effective once it is installed.
The tax credits usually cover the majority of geothermal heat pump components as well its installation. As long as the heat pump component has been certified by the manufacturer certification statement, it qualifies for the 30% tax credit coverage. There could be some add-on components that will not be covered, for instance emergency backup systems as well as ducts. Such components do not have a direct relation to the efficiency of the geothermal heat pump property that is under the tax credit cover.
There are many benefits you will gain from using a geothermal heat pump system. It is going to help you cut your energy bills in about half compared to the ordinary heating and cooling system. You won’t also need to spend a lot of maintenance since they require very few checkups. And since they do not emit any greenhouse gases, they are very great for the environment. But what you need to consider when purchasing one is to make sure that it meets the energy star requirements to be sure that you are getting an efficient system.