May 20, 2023

Geothermal Tax Credits and Incentives for 2023

Paying taxes is a natural part of life. Every year, you need to file with the IRS. Whether you work for a company or yourself, you pay a rate based on how much you made in the previous year. Taking deductions is a great way to reduce the total amount you owe. You’ll find deductions when you donate to a charity or work from home and have a dedicated office. There is also a geothermal tax credit for 2023 that helps you save as well as other incentives for making your home more energy efficient.

What Is Geothermal Heating and Cooling?

Geothermal heating and cooling systems are alternatives to traditional HVAC systems. This system consists of various pipes filled with a special type of liquid. When the sun beats down on the ground, it heats the earth and creates a form of thermal energy. When you install a geothermal system, Scott-Lee Heating Company places pipes around and under your home.

On cold days, the pipes collect this energy and use it to heat your home. The earth stays at around 55 degrees Fahrenheit, which is much warmer than the air. As the liquid flows through the pipes, it warms up. The liquid then moves through the heat pump to keep your home at a comfortable temperature. This system goes through the same process on hot days to decrease the temperature inside your home.

Geothermal Heat Pump Tax Credit

The Inflation Reduction Act of 2022 passed by the federal government, offers a tax credit for homeowners who install a geothermal heat pump. It gives you a 30% tax credit for a heat pump you installed in 2023. The Act will slowly adjust the size of the credit every year going forward through 2034. You get a 26% tax credit when you install a geothermal heat pump in 2024 and a 22% tax credit for one you install in 2025. We recommend that you install one as soon as possible before the tax credit drops again.

Who Qualifies for the Tax Credit?

To take this tax credit, you need to meet certain requirements beyond just installing a new geothermal heat pump. One requirement is that the heat pump meets all of the Energy Star standards. You can only claim the credit if you buy a heat pump for your primary home. The government does not allow landlords to claim credits for any rental homes they own.

The only way you can claim the tax credit more than once is if you buy two geothermal heat pumps and use them in both your primary home and your vacation home. If one or both of those homes is outside of the United States, you cannot claim the credit, even if you bought heat pumps made in the United States. The government also prohibits residents from taking the tax credit if they use the heat pump as the primary heating source for a swimming pool and/or hot tub.

How the Tax Credit Works

When you work for another person or a company, they will take money out of each paycheck to cover your taxes. Once you file your taxes, you get a refund if you paid more than you owed in the last year. Some people receive bills from the IRS because they didn’t pay enough. This can happen if your employer made a mistake when filing your paperwork or another person claimed you as a dependent. Tax credits help you reduce the total amount you owe.

The geothermal tax credit lets you claim a percentage of what you paid for both the heat pump and its installation. If you qualify for the 30% tax credit and paid $12,000 for a heat pump, you get a tax credit for $3,600. This allows you to get more money back when you qualify for a refund but also allows you to pay less when you owe money to the IRS. You also have the right to claim the credit several times until the Act expires. Fill out the IRS Form 5695 when you file your taxes to claim the geothermal tax credit for 2023.

State Incentives

Working with Scott-Lee Heating Company helps you take advantage of incentives from the State of Missouri in addition to using the tax credit. Ameren Missouri has a rebate program for residents who install new geothermal heat pumps. This program gives you back $700 to $1,800 when you buy and install this type of system. The total amount you get back depends on how much you spent.

Ameren Missouri offers a similar program for those who live in St. Louis. You must replace your old furnace or heat pump and replace it with a geothermal heat pump. This program also allows you to get money when you replace an electric furnace with one of these new pumps. You can get up to $2,000 back from Ameren Missouri as a thank-you gift for helping the utility provider save money.

If you are a member of the Cuivre River Electric Cooperative, you also qualify for a rebate based on the size of your heat pump. Geothermal heat pumps have a tonnage rating of one to five tons. The cooperative gives you back $750 per ton for your new heat pump. When you install a five-ton pump, you get back $3,750.

Brand Rebates

Another way to save money is with the rebates that some brands offer. You’ll often find information about these programs on our website, which also helps you find all of our discounts and specials. Check out discounts to see how you can save money on a new geothermal heat pump or any other heating and cooling products you need.

With brand rebates, you just need to buy a certain type of geothermal heat pump. The rebate usually only works if you buy a specific model and within a certain time frame. Once you fill out a form and send it back to the company, you get your rebate in the form of a check.

How to Use Tax Credits and Incentives

Getting the federal geothermal heat pump tax credit is easy. Once you hire Scott-Lee Heating Company and we finish installing it, you can keep a record of the job. When you file your taxes, fill out the correct form and send it to the IRS. If you file online, you can fill out a digital version of the form and see how much it reduces your taxes.

Most of the incentives you get require similar steps. You usually need to complete a form and submit it to your energy provider. The provider may ask for more proof, such as the number of who installed it or a copy of your receipt. You may have the option of getting your money back in the form of a check or through direct deposit to your bank account.

Enjoy the Benefits of Geothermal Heating

Geothermal heating and cooling have lots of benefits for Missouri residents. No matter where you live in the St. Louis area, you qualify for the federal tax credit when you install a new heat pump as well as incentives and rebates. Reach out to Scott-Lee Heating Company to learn more about the reasons to install a new geothermal heat pump. We offer heating, cooling, and indoor air quality services.