Geothermal Financing & Tax Credits

Geothermal HVAC Tax Incentives for Residential & Commercial Projects

Investing in geothermal HVAC systems comes with significant tax benefits under the Inflation Reduction Act (IRA). Whether you’re a homeowner or a business, these incentives make geothermal heating and cooling more affordable than ever.

Residential Tax Credit

• 30% Tax Credit: Homeowners can claim a 30% federal tax credit on the cost of a geothermal HVAC system through 2032.
• Ramps Down: The credit decreases to 26% in 2033 and 22% in 2034.
• No Cap: There is no upper limit on the amount homeowners can claim.
• Eligible Costs: The tax credit applies to the geothermal unit and loop field. Ductwork and other accessories do not qualify.
• Efficiency Requirements: The system must be ENERGY STAR® certified.
• Retroactive: The credit applies to systems installed since January 1, 2022.
• Filing: Homeowners must use IRS Form 5695 to claim the credit.

Commercial Tax Credit

• Base & Bonus Credit: Businesses can claim a 6% base tax credit or a 30% credit with prevailing wage and apprenticeship requirements through 2032.
• Gradual Phase-Out: The credit drops to 25% in 2033 and 22% in 2034.
• Eligibility: All business types, including tax-exempt organizations, can qualify. Tax-exempt businesses can receive a direct pay benefit.
• Eligible Costs: The credit applies to the geothermal unit, loop field, and accessories, provided at least 75% of the energy used comes from the geothermal source.
• Additional Benefits:
  • Domestic Content Bonus: An extra 10% credit for using U.S.-made components.
  • Depreciation Benefits: Businesses can leverage Modified Accelerated Cost Recovery System (MACRS) and Bonus Depreciation for additional tax savings.
  • Section 179D Deduction: Tax deductions up to $5 per square foot for energy-efficient commercial buildings.
• Filing: Businesses must use IRS Form 3468 to claim the credit.

Now is the time to invest in geothermal HVAC and take advantage of these federal tax incentives! Consult your tax professional for more details on how to maximize your savings.