Federal tax credits are available for residential geothermal heat pump system installations! Under the Residential Renewable Energy Tax Credit, 30% of the cost of residential geothermal heat pump installations may be claimed, with no upper limit. A Tax Credit is $1.00 credit for $1.00 owed (whereas a deduction just removes a percentage of the tax owed). The tax credit can be carried over from year to year if it is not all used within the same year it is credited.
In order to qualify for the tax credit, the geothermal heat pump must meet or exceed the Energy Star Program requirements (for example EER and COP) that were effective when the geothermal heat pump was installed. You can claim everything that it cost you to upgrade your heating and cooling system to the geothermal heat pump system - the cost of the geothermal heat pump, the earth loop piping, all of the parts and materials for the system, all of the digging costs (if you pay to have it done), and any labor you have to pay to have it installed.
Starting December 1, 2009, the geothermal heat pump does not have to have water heating (hot water generator (HWG), desuperheater) in order to qualify for the tax credit.
Please see the following links to the Department of Energy and the Energy Star websites for more information:
This tax credit expires December 31, 2016, so start your geothermal heat pump installation today!