Durability

Geothermal heat pumps are durable and require little maintenance. They have fewer mechanical components than other systems, and most of those components are underground, sheltered from the weather. The underground piping used in the system is often guaranteed to last 25 to 50 years and is virtually worry-free. The components inside the house are small and easily accessible for maintenance. Warm and cool air is distributed through ductwork, just as in a regular forced-air system.

Since geothermal systems have no outside condensing units like air conditioners, they are quieter to operate.

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How Do They Work?

Remember, a geothermal heat pump doesn’t create heat by burning fuel, like a furnace does. Instead, in winter it collects the Earth’s natural heat through a series of pipes, called a loop, installed below the surface of the ground or submersed in a pond or lake. Fluid circulates through the loop and carries the heat to the house. There, an electrically driven compressor and a heat exchanger concentrate the Earth’s energy and release it inside the home at a higher temperature. Ductwork distributes the heat to different rooms.

In summer, the process is reversed. The underground loop draws excess heat from the house and allows it to be absorbed by the Earth. The system cools your home in the same way that a refrigerator keeps your food cool – by drawing heat from the interior, not by blowing in cold air.

The geothermal loop that is buried underground is typically made of high-density polyethylene, a tough plastic that is extraordinarily durable but which allows heat to pass through efficiently. When installers connect sections of pipe, they heat fuse the joints, making the connections stronger than the pipe itself. The fluid in the loop is water or an environmentally safe antifreeze solution that circulates through the pipes in a closed system.

Another type of geothermal system uses a loop of copper piping placed underground. When refrigerant is pumped through the loop, heat is transferred directly through the copper to the earth.

As with any heat pump, geothermal and water-source heat pumps are able to heat, cool, and, if so equipped, supply the house with hot water. Some models of geothermal systems are available with two-speed compressors and variable fans for more comfort and energy savings. Relative to air-source heat pumps, they are quieter, last longer, need little maintenance, and do not depend on the temperature of the outside air.

US Department of Energy  http://apps1.eere.energy.gov/consumer/your_home/space_heating_cooling/index.cfm/mytopic=12640           

Residential Geothermal Tax Incentives

30% of total GHP system cost
Credit limited to $2000 for 2008
No limit to credit amount for 2009 to 2016
Can be used to offset AMT tax
Can be combined with solar and wind tax credits
Can be used in more than one year

Eligibility:

Home must be located in the U.S.
Includes houses, apartments, condos, mobile homes
Does not have to be your main home
GHP must meet Energy Star requirements
Installed between 1/1/2008 and 12/31/2016

Commercial Geothermal Tax Incentives

10% of total GHP system cost
No limit to total credit amount
Can be used to offset AMT tax
Can be combined with solar and wind tax credits
Can be used in more than one year
10% grant available in lieu of tax credit

Accelerated Depreciation:

5 year MACR depreciation for entire GHP system
Eligible for 50% first-year bonus depreciation for 2008 – 2009

Eligibility:

Building located in U.S.
Original use begins with taxpayer

Installed between 10/3/2008 and 12/31/2016

Recent Congressional legislation has improved the tax credit for installation of residential

heat pumps. With the new laws, a residential customer who installs a residential

geothermal heat pump may be eligible for a tax credit of 30% of the installed cost of the

system, no cap.

As part of the economic rescue bill (HR 1424) passed in October 2008, a residential

system installed and placed in service anytime between January 1, 2008 and December

31, 2016 was eligible for a tax credit equal to 30 % of the installed cost of the system up

to a cap of $2000 for a single residence.

The Stimulus Bill signed recently by President Obama improves that tax credit.

Specifically, systems placed in service after January 1, 2009 are no longer subject to the

caps. As a result, an installed system now is eligible for a 30% tax credit of the total

installed cost of the system. In addition, if the taxpayer can’t use the credit in the year

the system is installed, he or she can carry any unused credit into the next tax year.

Some key dates to keep in mind:

• If you installed a system and placed it “in service” anytime in 2008, you

are entitled to a tax credit equal to 30% of the cost of the system subject

to a cap of $2000 for a single family.

• 2009 installations are not subject to the cap.

Other provisions of the residential credit remain the same:

1. The system must meet Energy Star requirements in effect at the time the

system is completed.

2. The system must be in the taxpayer’s residence but is not limited to the

primary residence.

3. There are no specific requirements for the invoice. However, it will be

helpful if the invoice states “Geothermal Heat Pump” and that it “Exceeds

requirements of Energy Star program currently in effect” on it.

4. The taxpayer has to file the Form 5695 to receive the credit.

There is a special rule for Condos;

In a typical condo, the owners contribute to the upkeep by paying money to a

condominium management association. If the association puts in qualifying equipment,

each member of the association can claim the residential tax credits on his or her taxes

for his or her share of the spending. The condo has to be “substantially used as

residences.”

Last, in most cases, a condo association is not a taxable entity. The individual unit

holders would be the ones that can benefit from a tax credit.

Geothermal Tax Credits

An exciting new tax credit is now available for home and commercial building owners who install geothermal heating and cooling systems through the Energy Improvement and Extension Act of 2008 (H.R. 1424). H.R. 1424 offers a onetime tax credit of 30% of the total investment for homeowners who install residential ground loop or ground water geothermal heat pumps.. A credit of 10% of the total investment is also available (no maximum) for a commercial system installation.

To qualify, the systems must meet or exceed EnergyStar requirements and be installed after December 31, 2007. While units installed in 2008 are subject to a $2,000 cap on the credit, units installed from 2009 through 2016 can take advantage of the full credit. Owners can file for the credit by completing the Renewable Energy Credits subsection on their tax return forms for 2008. For taxpayers that are subject to the Alternative Minimum Tax, they can claim the credit on their taxes for the following year. No proof of purchase will be required; however, in case of an audit, owners are encouraged to keep a detailed invoice of their purchase on file. The contractor who sold and installed the product should list the purchase as a “Geothermal Heat Pump” on the invoice and that it “Exceeds requirements of Energy Star program currently in effect”.

The tax credit is available through December 31, 2016. Consult your local tax professional for advice on taking advantage of the tax credit, as this announcement is not intended as a recommendation or endorsement of any financial strategy.

Download the brochure: Understanding the Federal Tax Incentives

Helpful Resources
– Excerpt from the Energy Improvement and Extension Act pertaining to geothermal.
– IRS Form 5695*: Residential Energy Efficient Property Credit
– More Information about the “Residential Renewable Energy Tax Credit”
– Find additional tax incentives that may be available in your state – www.dsireusa.org

Consult your tax professional for details.
*Form 5695 for the 2009 tax year are not yet available.

Johnny@GreenAirExpert.com

www.geothermalexperts.net