Over the past several years, you may have heard talk about federal tax credits for homeowners who make certain home improvements, such as installing new high-efficiency HVAC equipment. Currently, there is a geothermal tax credit available to Lansing and Grand Rapids area homeowners who install new geothermal heat pump systems that meet certain requirements. A-1 Mechanical shares the details of this credit and why a geothermal system is a great investment for your household.
About the Geothermal Tax Credit
Thanks to the Consolidated Appropriations Act of 2021, there are various renewable energy tax credits available to homeowners across the country. Homeowners can gain this tax savings by installing approved fuel cells, small wind turbines, solar energy systems, or geothermal heat pumps.
Under the current federal geothermal tax credit, homeowners can claim a federal tax credit of 26% of total installation costs for geothermal heat pump systems placed into service before January 1, 2023. This credit is retroactive for all qualifying systems installed starting January 1, 2020 – so if you recently installed a geothermal system at your home, check to see if you qualify for this savings. Starting January 1, 2023, the tax credit amount will drop to 22%, so if you’re considering a new geothermal system, you’ll save more if you install one sooner rather than later.
The geothermal tax credit can be claimed for systems installed at a secondary residence, as it is not required that the credit only be claimed for systems installed at a primary home. In order for a system to meet the requirements for homeowners to claim the geothermal tax credit, the geothermal heat pump installed must meet ENERGY STAR requirements as of the date of the expenditure.
Currently, the specifications for a qualifying geothermal heat pump’s EER (energy efficient ratio) and COP (coefficient of performance) are:
- Greater than 17.1 EER and 3.6 COP for water to air closed loop systems
- Greater than 21.1 EER and 4.1 COP for water to air open loop systems
- Greater than 16.1 EER and 3.1 COP for water to water closed loop systems
- Greater than 20.1 EER and 3.5 COP for water to water closed loop systems
- Greater than 16 EER and 3.6 COP for direct expansion systems
Benefits of Installing a Geothermal System
Geothermal systems are a type of HVAC system that provides both heating and cooling using natural energy held within the earth. These systems are extremely energy efficient and come with unmatched benefits including:
- Extremely long service life. Geothermal heat pumps last about 20 years or more on average, and underground loop components last 50 or more years!
- Geothermal heating and cooling equipment makes very little noise while operating so you’re not disturbed by your HVAC system.
- Heat pumps used in geothermal systems have few moving parts, requiring less maintenance and experiencing fewer breakdowns than other types of HVAC equipment.
- Geothermal systems exchange heat to warm or cool your home, so they use far less electricity than other types of HVAC systems. Using a geothermal system could cut your cooling bills 20 to 50%, and lower your heating bills 30 to 60%!
Get a Quote for Geothermal System Installation Today!
A-1 Mechanical installs geothermal HVAC systems for homeowners throughout the Lansing and Grand Rapids, Michigan areas. If you would like to learn more about geothermal heating and cooling and learn how much you could save by taking advantage of the geothermal tax credit, call A-1 Mechanical today to request an estimate for geothermal system installation.