President Joe Biden signed the Inflation Reduction Act (IRA) into law on Aug. 16, 2022 a sweeping legislation which includes green energy tax breaks for residents. According to the Internal Revenue Service (IRS), taxpayers who invest in energy improvements for their main home — including solar, wind, geothermal, fuel cells or battery storage — may qualify for an annual residential clean energy tax credit.
One of these improvements, the geothermal heat pump, could save you thousands of dollars thanks to both tax credits and lower bills.
The pump, which dates back to the 1940s, uses the relatively constant temperature of the earth as the exchange medium instead of the outside air temperature, according to the Energy Department. And what’s more, it could save you thousands of dollars.
Geothermal heating is three to five times more efficient than traditional heating systems, and doesn’t burn fossil fuels. In turn, you can expect to pay much less on your heating and cooling bills, saving you about $1,500 a year, according to The Cool Down, citing data from renewable energy company Geotherm.
While an average geothermal installation costs about $24,000, Rewiring America noted they have a 30-to-50 year lifespan. And these are eligible for the residential clean energy property credit of 30% until 2032, per the IRS. To qualify for the credit, the geothermal heat pump property must meet the requirements of the Energy Star program that are in effect at the time of purchase.
For the tax credit, submit IRS Form 5695 when filing your taxes if you meet the requirements detailed on the IRS website, according to the Energy Department.
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