New tax credit change makes geothermal more affordable

A new law that took effect this year can help home- and business-owners save thousands of dollars as they improve their heating systems.

Under the old law, enacted in 2008, owners could qualify for a 30 percent tax credit up to $2,000 to install geothermal heat pumps in any property they own, not just their primary residence.

But the new law removes that cap, so you can take a 30 percent tax credit on the entire purchase and installation cost of a geothermal system.

Here are some of the other features of the new law, which is effective through 2016:

• The credit includes labor costs properly allocable to the onsite preparation, assembly, or original installation of the property and for piping or wiring.
• Qualified geothermal heat pump must meet federal Energy Star program requirements in effect at the time the installation is completed.
• The home served by the system does not have to be the taxpayer’s principal residence, but must be within the United States.
• Systems must be placed in service from Jan. 1, 2008, through Dec. 31, 2016.
• Tax credit can be used for more than one property owned by the taxpayer during the effective period.
• Can be used in more than one year
• Can be combined with solar and wind tax credits
• Can be combined with energy efficiency upgrade credits such as qualified windows or Energy Star appliances.