Geothermal Systems May Qualify for Tax Benefits

HVAC, energy efficiency, tax deductions, cost savings, ASHRAE 90.1, Energy Policy Act, EPAct, geothermal systems   July 20, 2010

Today's topic is tax benefits for geothermal systems.

Geothermal systems work by transferring heat to and from the ground or ground water. In cold weather, the liquid in the pipes draws heat from the subsurface; in warm weather, heat from the building is transferred into the ground.

Geothermal systems provide heating and cooling without the use of fossil fuels. As a result, they have garnered new attention because of the growing interest in green design.

Geothermal systems may qualify for federal tax benefits in several ways. But some require action this year, says Charles Goulding of Energy Tax Savers.

For example, there is a 10 percent geothermal tax credit or an equivalent 10 percent cash credit in lieu of the tax credit. The cash credit is only available for geothermal projects that commence by December 31, 2010. In addition to the credit or cash grant, a geothermal project will also be eligible for accelerated 5 year MACR's tax depreciation and additional bonus tax depreciation in tax years where bonus depreciation is available, says Goulding.

Geothermal installations may also qualify for tax deductions under the Energy Policy Act, or EPAct, if the project reduces energy costs at least 16.67 percent below the costs for a building designed to meet ASHRAE 90.1-2001. Energy modeling is required to show the energy cost savings. Goulding says that geothermal systems are among the types of HVAC installations that most often qualify for EPAct deductions.


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