Is there a tax credit for water-to-water geothermal heat pumps?

As of December 1, 2009, water-to-water geothermal heat pumps can qualify for the tax credit.

The tax credit is NOT retroactive. To receive the tax credit, water-to-water geothermal heat pumps must be purchased on or after December 1, 2009.

Note, the tax year in which the tax credit is applied is tied to the time the equipment is "placed in service." If you purchased the unit in December 2009 but it is not "placed in service" until January 2010 you would apply the tax credit to your 2010 tax return. The geothermal tax credit can be carried forward to future years.

The geothermal heat pump tax credit is for 30% of the cost of the product (plus installation costs) with no upper limit, through 2016.

-----------------------------------------------------------------------------------------------------------------------------------------------------

Source:

The law (ARRA Section 25D(5)(B)) specifies: The term 'qualified geothermal heat pump property' means any equipment which- (i) uses the ground or ground water as a thermal energy source to heat the dwelling unit referred to in subparagraph (A) or as a thermal energy sink to cool such dwelling unit, and (ii) meets the requirements of the Energy Star program which are in effect at the time that the expenditure for such equipment is made.

IRS Guidance: Notice 2009-41 Section 3. (1)(e) Qualified geothermal heat pump property expenditures are expenditures for equipment which uses the ground or ground water as a thermal energy source to heat the dwelling unit or as a thermal energy sink to cool the dwelling unit, meets the requirements of the Energy Star program which are in effect at the time that the expenditure for such equipment is actually made (even if under § 25D(e)(8) the expenditure is deemed made at a later time for purposes of determining the taxable year for which a taxpayer may claim the credit), and is installed on or in connection with a qualifying dwelling unit.