Federal Residential Geothermal Tax Credits
The Inflation Reduction Act (H.R. 5376) was signed into law in August 2022. The bill extends the credits for all Section 25D technology installations at the following rates:
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- 26% (2021)
- 30% (2022-2032)
- 26% (2033)
- 22% (2034)
- ZERO (2035 and after)
The credits are not refundable. The credits can be carried forward for a maximum of ten years. Distribution equipment such as ductwork or radiant flooring are not eligible for the credit.
Many of the implementation details of the programs in the Inflation Reduction Act are currently in the regulatory process.
Find more information about eligibility and Federal Form 5695 on the Internal Revenue website.
Federal Commercial Geothermal Tax Credits
The Inflation Reduction Act extended the Federal Investment Tax Credit (Commercial Installation Credits – IRC Sec. 48) under a two tier structure. There are several outstanding implementation detail questions that will require regulatory and possibly legislative clarification.
Iowa Geothermal Property Tax Exemption
The Iowa Geothermal Property Tax Exemption is for the value added by any new or refitted construction or installation of a geothermal heating or cooling system on residential property. Unlike other exemptions, it does not have to be applied for in the year it was first added. The exemption runs for 10 years after it is applied for. Signup deadline is February 1. See Tax Credits and Exemptions on Iowa Department of Revenue website. Scroll to down to the Iowa Geothermal Heating and Cooling System Exemption.
Disclaimer
The Iowa Geothermal Association (IGA) does not provide legal, tax or accounting advice; the information provided is intended to be general in nature; and visitors to the IGA website should consult their own professional tax, accounting and legal advisors on individual tax matters.
Useful Links
The links below provide information on state, local and federal incentives that promote energy efficiency. Please be aware that your eligibility for an incentive will depend upon meeting specific criteria and it is recommended that you to consult with your tax preparer.
Check your Iowa utility’s website for their incentive programs for geothermal or ground source heat pumps.
Iowa Incentives & Property Tax Exemptions for Geothermal, Renewables and Efficiency **
Federal Residential Renewable Energy Tax Credit **
The following link to a U.S. Department of Energy website also provides a useful resource that is a good companion to the links on this page. All offer information for the states on energy tax credits, rebates and savings but information filters provided at http://energy.gov/savings make it easy to sort by type. Just select “Geothermal Heat Pumps” for any state or select “All” for a listing of every state that has some sort of financial assistance for geothermal heat pump installations.