We’re all guilty of putting off vehicle repairs, home updates and work in general, often for the sake of time and money. However, if you’re considering geothermal installation for your home, 2016 is the year to get it done. Why? The 30 percent federal tax credit is set to expire in December 2016. Be sure to take advantage of the energy efficient, green heating and cooling system before it’s too late!
Why Should I Install Geothermal Now?
Consumer demand for geothermal systems is expected to grow exponentially throughout 2016, and those who wait to schedule installation may have a difficult time completing it before year-end. Tax refunds from 2015 are also a great opportunity to reinvest in your home.
What Types Of Properties Qualify For the Tax Credit?
The tax credit is referred to as a residential energy-efficient property credit. This provides a 30 percent tax credit for spending on qualified property placed in service through the end of 2016. The tax credit also applies to both new and existing homes, including houses, apartments, condos and mobile homes. The property must be used as a residence by the taxpayer, but is not required to be the primary residence.
As a member of a cooperative or condominium, you are a shareholder and may claim a tax credit on your share of the spending. Check with your tax provider to see if your home is eligible for a state or federal tax incentive.
What If My Home Is Also My Business?
If your home serves a dual purpose, the spending may have to be allocated between residential and business use. If the portion considered residential is at least 80 percent, then all of the spending qualifies for the residential credit.
Does Iowa Have Additional Incentives?
Yes. The Iowa tax credit matches 20 percent of the federal tax credit. What does this mean? Because the federal tax credit is set at 30 percent, the state tax credit is equal to 6 percent of the system cost.
Does the Tax Credit Cover All Geothermal Installation Costs And Components?
The tax credit may be claimed for spending on what is termed qualified geothermal heat pump property. This includes equipment that uses the ground or ground water as a thermal energy source to heat the home or as a thermal energy sink to cool the dwelling unit, and equipment that meets Energy Star® requirements. Spending for labor costs of the geothermal heat pump and for any associated piping, wiring and interconnecting ducting is also covered. In simple terms, this includes all parts that come with the heat pump, as well as the installation of the heat pump and ground loop.
Are There System Components That Aren’t Covered By the Tax Credit?
The distribution system, emergency heat portions of the system and add-on components are not covered as part of the federal tax credit. The credit cannot be claimed on spending for equipment used only to heat a swimming pool or hot tub, or on previously used equipment.
Is There a Maximum Amount I Will Be Reimbursed?
There is no limit on the amount of the tax credit that can be claimed. Individuals can claim a tax credit equal to 30 percent of spending on qualified geothermal heat pump property. The tax credit can be used to offset both regular income taxes and alternative minimum taxes.
How Do I Claim My Tax Credit?
Simply visit the IRS website, and complete Form 5695 to qualify. Always consult with your tax consultant or accountant to ensure accurate reporting, verification and coverage.
Are Additional Incentives Available?
Yes. Many states offer rebates or low-interest loans to encourage the installation of geothermal. Utility providers also provide rebates and financing programs. Check with your tax advisor and local utility company to see what additional money saving options you can discover in 2016.
If you’re looking for a way to add value, save energy and take advantage of tax credits this year, now is the time to invest in geothermal. Don’t leave this home improvement opportunity on the table this year!