Federal Energy Rebates

The American Recovery and Reinvestment Act of 2009, H.R.1 (the Stimulus Bill of 2009) that was signed by the President on February 17, 2009, contains long-term tax incentives to encourage the installation of geothermal heat pumps in residences. The new law, effective January 1, 2009, offers a one-time tax credit of 30% of the total investment for geothermal heat pump installations?without the limit of $2,000 that was part of the law enacted in 2008.

It should be understood that a tax credit is generally more valuable than a tax deduction of the same magnitude because a tax credit reduces the tax obligation directly, while a deduction only reduces taxable income. Therefore the reduction in tax is only a fraction of the deduction.

While it is expected to take many months for the IRS to release the updated forms and instructions for filing to claim this credit, it is expected that the credit will be treated as a refundable credit, so they not only directly reduce the amount of tax payable, they could bring a taxpayer’s tax obligation into the negative.

A tax credit of 10% of the total investment is also available without a maximum credit limit for commercial installations.

Under the IRS rules, manufacturers need to certify that specific measures are eligible. Taxpayers should obtain a copy of this certification (see below) when buying these products from the manufacturer, contractor or retailer. Certifications need not be submitted to the IRS, but should be kept on file in case the IRS has questions.

Federal, State, Local and Utility Incentives

DSIRE is a comprehensive source of information on state, local, utility, and federal incentives that promote renewable energy and energy efficiency.

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