Incentives and Policies

State Incentives for Geothermal Installations

Currently, a 30% federal tax credit is available on the total cost of a geothermal installation. This credit will last through the end of 2016 if Congress does not reauthorize it. However, there are many state incentives that will not expire and it’s important that any homeowner/homebuyer considering a geothermal system be aware of what the state they reside in offers. These state rebates can save you money and make you feel even better about the choice you made!

Chances are the majority of geothermal customers don’t know exactly what’s available, or how to take advantage of the multitude of geothermal HVAC incentives out there. To help you, we have provided the following information, to include a state-by-state reference tool, to guide you through the process of discovery.

Let’s start by running down what’s available to to geothermal customers here in the U.S. Here is a quick list of some possible benefits that may be of advantage to you.

RESIDENTIAL (New and Retrofit)

  • Federal tax credit of 30%, uncapped

COMMERCIAL (New and Retrofit)

  • Federal tax credit of 10%, uncapped
  • Maximum Accelerated Cost Recovery System (MACRS) – benefit up to 38% uncapped

Everybody

Many of the incentives/benefits can be applied to the entire cost of a new geothermal HVAC system, or retrofit/improvements to an HVAC system. These improvements can include the following costs:

  • Geothermal source (ground loop/pond loop/class V well system or standing column well)
  • Geothermal heat pump equipment
  • Piping and peripherals (excludes ductwork)
  • Controls and indoor air quality (IAQ) items
  • Electrical service connections
  • Excavation & recovery costs
  • Engineered drawings, permits and fees

The federal incentives currently available through the year 2016 include different criteria for commercial and residential consumers. For your residence, you must be a taxpayer (currently paying income tax), and fill out a form IRS 5695. You will get 30% of the entire cost of your new or replacement geothermal HVAC system back in direct tax credits. These tax credits can be rolled over year-to-year until you get the full benefit of your tax credit incentive. For a quick example, if you purchase a geothermal HVAC system valued at $30,000, you will receive a $9000 tax credit on your next tax filing in which you include the IRS form 5695 mentioned above.

The National Database for State Incentives/Rebates

The main resource for exploring your options is the Database of State Incentives for Renewable Energy (DSIRE) Website, which is maintained by the North Carolina Clean Energy Technology Center at North Carolina State University and funded by the U.S. DOE. When you click on the link, you will be directed to a map like the one shown below.

 DSIRE Map

For those geothermal customers willing to navigate the DSIRE website, be aware that it provides information on a number of energy-saving products, so pulling out the specific incentives for ground-source heat pumps by individual states can be challenging.

To alleviate this problem and speed you to the exact information you’re looking for regarding geothermal installation incentives by individual states, see the state listings table below. Simply click on your state and the major incentives appear, which are linked to the DSIRE website.

Categories to look for:

  1. Loan Programs: These energy efficiency loans are offered with differing incentives depending on the jurisdiction. Some of the incentives may include low interest rates, no application fees and extended periods of time to pay back the loan.
  2. Rebate Programs: Qualifying geothermal installations will receive rebates from local utilities or jurisdictions that can be a fixed dollar amount per installation, per ton, or a percentage of the entire job. These rebates often have a “cap” amount.
  3. PACE Programs: “Property Assessed Clean Energy” programs are becoming more common around the US. This federally backed program allows funding of geothermal installation that is paid back through a property tax assessment. This is favorable, because the loan is tied to the property, and the increase in property taxes is designed to be overshadowed by the savings realized in reduced energy consumption of the GHP System.
  4. On Bill Financing: Usually administered by an electrical utility, “On Bill Financing” allows the utility to pay the up-front costs for a geothermal systems installation, then charge the costs back to the consumer each month with regular utility service billing. Like “PACE Financing”, this is also a favorable program, because the loan is tied to the utility charges, and the increase in repayment fees for the GHP system is designed to be overshadowed by the savings realized in reduced energy consumption of the GHP system.
  5. Tax Exemptions
    1. Tax Credits: Like federal tax credits, local tax credits are favorable to those that have a tax burden. The tax credits are normally a percentage of the geothermal job cost, and the approved dollar amount is credited against the tax burden realized by the qualified individual.
    2. Property Tax Exemption: A property tax exemption usually exempts a dollar amount up to the entire cost of the GHP installation from property tax assessment permanently, saving the consumer on property tax assessments.
    3. Tax Free Sales and Use Purchases: The sales and use exemption usually eliminates sales tax for, and usually covers both the equipment related to eligible systems, and labor (services) relating to the installation of eligible systems.

Alabama

Alaska

No Local GHP Incentives Noted

American Samoa

No Local GHP Incentives Noted

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

Florida

Georgia

Guam

No Local GHP Incentives Noted

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

No Local GHP Incentives Noted

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Northern Marianas Islands

No Local GHP Incentives Noted

Ohio

Oklahoma

Oregon

Pennsylvania

Puerto Rico

No Local GHP Incentives Noted

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Virgin Islands

No Local GHP Incentives Noted

Washington

West Virginia

No Local GHP Incentives Noted

Wisconsin

Wyoming

Watch the DSIRE Navigation Tutorial Video

For those who want, or need to, navigate the DSIRE website, Geo consultant Jay Egg has developed a short learning video. Follow his steps as he shows you how to go straight to your incentives. Watch this video and you can be an expert: DSIRE Navigation for GHP’s (Geothermal Heat Pumps).

Helpful Terms Explained

In your search for specific state incentives for geothermal, you are bound to encounter an array of unfamiliar terms. To help you understand these terms, we have included an alphabetical listing of incentives and policies for renewable energy and energy efficiency. For quick definitions, we have provided links to the best websites we’ve identified to help define these programs.

For a short definition, review this glossary of incentives and policies to be found at the DSIRE website: each of them promotes renewable energy and energy efficiency. You will find that the DSIRE glossary has two general categories — (1) Financial Incentives and (2) Rules, Regulations & Policies — and roughly 30 specific types of incentives and policies. This glossary provides a description of each specific incentive and policy type.