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Then print your copy of the IRS Tax Credit Form 5695.
Important Tax Credit Downloads
Geothermal_Heat_Pump_Specification
IRS Form 5695
Geothermal Tax Credit
An exciting new tax credit is now available for home and commercial building owners who install geothermal heating and cooling systems through the Energy Improvement and Extension Act of 2008 (H.R. 1424). H.R. 1424 offers a onetime tax credit of 30% of the total investment for homeowners who install residential ground loop or ground water geothermal heat pumps.. A credit of 10% of the total investment is also available (no maximum) for a commercial system installation.
To qualify, the systems must meet or exceed EnergyStar requirements and be installed after December 31, 2007. Owners can file for the credit by completing the Renewable Energy Credits subsection on their tax return forms for 2008. For taxpayers that are subject to the Alternative Minimum Tax, they can claim the credit on their taxes for the following year. No proof of purchase will be required; however, in case of an audit, owners are encouraged to keep a detailed invoice of their purchase on file. The contractor who sold and installed the product should list the purchase as a “Geothermal Heat Pump” on the invoice and that it “Exceeds requirements of Energy Star program currently in effect”.
The tax credit is available through December 31, 2016. Consult your local tax professional for advice on taking advantage of the tax credit, as this announcement is not intended as a recommendation or endorsement of any financial strategy
Geothermal heat pumps are similar to ordinary heat pumps, but use the ground instead of outside air to provide heating, air conditioning and, in most cases, hot water. Because they use the earth’s natural heat, they are among the most efficient and comfortable heating and cooling technologies currently available.
Requirements
| Closed Loop: | Open Loop: | Direct Expansion: |
| EER ≥ 14.1 | EER ≥ 16.2 | EER ≥ 15 |
| COP ≥ 3.3 | COP ≥ 3.6 | COP ≥ 3.5 |
Tax Credit includes installation costs.
Air Source Heat Pump Tax Credit
Heat pumps offer an energy-efficient alternative to furnaces and air conditioners in moderate climates. Like your refrigerator, heat pumps use electricity to move heat from a cool space into a warm, making the cool space cooler and the warm space warmer. During the heating season, heat pumps move heat from the cool outdoors into your warm house; during the cooling season, heat pumps move heat from your cool house into the warm outdoors. Because they move heat rather than generate heat, heat pumps can provide up to 4 times the amount of energy they consume.
Requirements
| Split Systems: | Package systems: |
| HSPF ≥ 8.5 | HSPF ≥ 8 |
| EER ≥ 12.5 | EER ≥ 12 |
| SEER ≥ 15 | SEER ≥ 14 |
Tax Credit includes installation costs.
Central Air Conditioning Tax Credit
The best way to find tax credit eligible CACs is to ask your HVAC Contractor (Heating Ventilation and Air Conditioning). To verify tax credit eligibility, ask your HVAC contractor to provide the Manufacturer Certification Statement for the equipment you plan to purchase. Or, search the Manufacturer’s website.
Requirements
| Split Systems: | Package systems: |
| SEER ≥ 16 | SEER ≥ 14 |
| EER ≥ 13 | EER ≥ 12 |
Tax Credit includes installation costs.
Gas Furnace Tax Credit
A furnace uses the combustion of fuel and air to create heat.
Requirements
AFUE ≥ 95
Tax Credit includes installation costs.
Gas Water Heater Tax Credit
Water heating can account for 14%–25% of the energy consumed in your home.
Requirements
Energy Factor ≥ 0.82 OR a thermal efficiency of at least 90%.
Tax Credit includes installation costs.
Electric Heat Pump Water Heater Tax Credit
Water heating can account for 14%–25% of the energy consumed in your home.
Requirements
Energy Factor ≥ 2.0
Tax Credit includes installation costs.
Most Commonly Asked Questions About The Energy Tax Credits
Question
How can I determine if I can collect the tax credit? Does it matter if I am getting a tax refund?
Answer
Whether or not you are getting a refund does not matter. What matters is your “tax liability” – which is the total amount of federal income tax you are responsible for paying.
These energy efficiency tax credits are technically “non-refundable” which means you can’t get more money back in tax credits than you pay in federal income taxes (your tax liability). Check your last year’s tax return to get a sense of your tax liability (line 61 on the 2008 1040 form, called “total tax”). You can claim all of your tax credits as long as your tax liability, is greater than zero after all tax credits have been applied.
For example, say your Adjusted Gross Income (AGI) is $50,000, your tax liability is $10,000 (before you apply tax credits), and you’ve had $12,000 withheld from your paychecks. In this scenario you could claim up to $10,000 in tax credits. If you are eligible for the entire $1,500 tax credit, then your tax liability ($10,000) would be reduced to $8,500. Since you already had $12,000 withheld, you will get a tax refund of $3,500 ($12,000 – 8,5000 = $3,500).
If your AGI was $50,000, your tax liability $10,000 (before tax credits were applied), and you had $8,000 withheld from your pay checks, you would still have the ability to claim up to $10,000 in tax credits. If you are eligible for the entire $1,500 tax credit, your tax liability ($10,000)would be reduced to $8,500 and you would owe the government $500 at the end of the year ($8,000 already paid in taxes – $8,500 tax liability = $500 final payment).
Question
Are the energy efficient tax credits limited by the Alternative Minimum Tax (AMT)?
Answer
For 2009 the energy efficient tax credits are NOT limited by the AMT.
“Section 25 D” products (which include geothermal, solar, and wind, at 30% with no upper limit) are NOT limited by the AMT at all.
“Section 25C” products (which include insulation, windows, doors, roofs, HVAC, and non-solar water heaters, at 30% up to $1,500) are NOT limited by the AMT in 2009, but are currently limited by the AMT in 2010, unless Congress amends the law.
The alternative minimum tax (or AMT) is an extra tax some people have to pay on top of the regular income tax. The AMT provides an alternative set of rules for calculating your income tax. In theory these rules determine minimum amount of tax that someone with your income should be required to pay. If you’re already paying at least that much because of the “regular” income tax, you don’t have to pay AMT. But if your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax. Various tax benefits that are available under the regular tax (like these tax credits) are reduced or eliminated. More information – Alternative Minimum Tax 101
Question
Can the energy efficiency tax credit be carried over to future years?
Answer
The tax credit for products at 30% up to $1,500 CAN NOT be carried over to future years. You can’t even carry forward tax credit dollars from 2009 to 2010. But you can take part of the $1,500 in 2009, and the rest in 2010 – if they are for separate purchases (ex: you spend $3,000 on windows in 2009 and get a $900 tax credit on your 2009 taxes, then spend $2000 on an air conditioner in 2010 and get a $600 tax credit on your 2010 taxes).
The tax credit for the following products at 30% with no upper limit CAN be carried forward to future years:
• Geothermal Heat Pumps
• Solar Panels
• Solar Water Heater
• Small Wind Energy Systems
• Fuel Cells
You can carry forward the credit as long as the credit is still in effect. In this case, the credit is in effect through 2016. The energy efficiency tax credit is technically “non-refundable” which means at the end of the year, you can’t get back more in credits than you paid to the government in taxes throughout the year. If you are unable to claim the entire 30% of your purchase for the above products, you can carry forward the unclaimed portion to future years through 2016.
The tax credit for insulation, windows, doors, roofs, HVAC, biomass stoves, and non-solar water heaters CAN NOT be carried over. These credits are for 30% of the cost, up to $1,500 in 2009 and 2010.
Question
I don’t have to file income taxes, can I still get the energy efficiency tax credit?
Answer
According to the IRS, if a person does not owe federal income taxes, they cannot claim a tax credit.
The energy efficiency tax credit is technically “non-refundable” which means at the end of the year, you can’t get back more in credits than you paid to the government in taxes throughout the year. So, if you don’t pay any taxes, you can’t get the credit.
