let me add to the confusion... here's my spin on what it all says:

first off, section 25C pertains to specific energy improvements to EXISTING HOMES and included such things as windows and and fans. It specified a specific percentage allowed (10%) and a maximum credit amount of $500
(It did not pertain to geothermal at all, from what I could read)-

Also, this section 25C only applied to energy related purchases made in 2007 - not purchases made in 2008 -
BUT - according to the new stimulus bill, it was put back in for 2009 - and now it only applies to purchases made this year - 2009 through 2010.
I also believe it was raised from 10% to 30% with a cap of $1500 dollars for things such as fans and windows.

Section 25D was added to the tax law in Oct 2008.
It was meant to replace 25C (which had expired at the end of the 2007 tax year)
It currently gives a tax credit of 30% of the cost of any geothermal systems installed in 2008 (with a $2000 cap). You can check this year's IRS form 5695 if you want to see how it works out.

The current stimulus bill (about to be signed into law) has kept the 30% credit, but removed the $2000 cap.
The law clearly states that this applies to property placed into service prior to Jan 1, 2017.
It also says that it applies to taxable years beginning after Dec. 31, 2008.

So, this is what it means to me in a nutshell:

If you own an existing home and had any sort of energy improvements done to it in 2008 (not counting wht's mentioned in 25D), you lose.

If you had geothermal installed in 2008, you get a max credit of $2000 this year.

HOWEVER, if your 30% credit was more than the $2000 cap, you should be allowed to claim and collect the rest when you file your 2009 taxes.

I say this only because it was "placed into service prior to Jan 1, 2017" - which means it qualifies

Additionally, to me, the term "applies to taxable years beginning after Dec. 31, 2008" means that I cannot get the additional credit until I complete my 2009 taxes next year.

It has nothing to do about when it was installed.

Am I wrong??????

Im not giving up I will find a 08 credit if its there

The proposal allows the taxpayer to make an irrevocable election to have certain
qualified facilities placed in service in 2009 and 2010 be treated as energy property eligible for a
30 percent investment credit under section 48. For this purpose, qualified facilities are facilities
otherwise eligible for the section 45 production tax credit (other than refined coal, Indian coal,
and solar facilities) with respect to which no credit under section 45 has been allowed. A
taxpayer electing to treat a facility as energy property may not claim the production credit under
section 45.

sorry here is the link page 68
http://www.jct.gov/x-5-09.pdf

I dont think this is residential but it might be

Page 70 shows 10% prior to 2017 does have placed into service at the bottom
Page 79 is the ticket talks about residential geo heat pumps

Very interesting...

The language for the geothermal credit does not have any after "placed in service dates", only the "before 2017" language. (Unlike Section 25C, which has VERY specific "placed in service" date language: The credit applies to expenditures made after December 31, 2008 for property placed in service after December 31, 2008, and prior to January 1, 2010.)

...nothing like that in section 25D.

So, it kinda makes sense, what geo fan is deducing...that one only has to hold off 'till 2010 to get the full 30%...by claiming it for 2009.

BUT - does this mean someone could claim expenses on a system put in 20 years ago?!

Keep Hope Alive!!!!  lol

I believe that is inaccurate

The credit is nonrefundable, and the depreciable basis of the property is reduced by the

amount of the credit. Expenditures for labor costs allocable to onsite preparation, assembly, or

original installation of property eligible for the credit are eligible expenditures

I just put my geo system in this month (Feb '09).  I was trying to press the contractor to install in '08 so I could take the immediate $2000 credit but cold weather here in MN delayed drilling for the ground loops until after the start of '09.

So either I get a sure $2k credit against my '09 taxes or can take the 30% of the total $26k cost?  Seems too good to be true and you know what they say about those deals.

BTW, my local energy company offers a rebate of $150/ton of Energy Star AC equipment so I will get a $600 rebate within the next several months.

Does the tax credit roll over to future years if you cannot use the entire tax credit. This was done for the small wind tax credit last year.

I'm not an accountant but I work in financial services and I'm often surprised about the fungability of these laws.  After the bill is signed into law then the IRS has to write the code.  Its amazing how often the guys at the IRS miss-state something in the code that might not capture the intent of the law.  Its more amazing to me the incompetence of many accountants that call themselves professional.

The fact is you made an investment that created work, is better for environment, will increase your potential saving/spending AND decreases our dependence on non-renewable energy.  For your investment in making the world a better place for my 10-month old daughter I say you take that tax credit.  The system was installed prior to 2017 and if you get audited stick to that argument.  Call me naive... It would be Un-American to penalize such a patriot.

183eej,

Would you double check the desuperheater requirement you mentioned?  I don't see it in the bill but I could be wrong.  thanks!

183eej,

Would you double check the desuperheater requirement you mentioned?  I don't see it in the bill but I could be wrong.  thanks!

Hydron posted this on their website today:

The new law makes important changes to existing tax incentives for homeowners who make qualified improvements of higher efficiency HVAC and water heating equipment to their primary residences. Homeowners who install geothermal heat pump systems may be able to claim up to 30% of the installed costs in tax credits in the year the system is placed into service. Please notice that the $2,000 tax credit limit has been removed from the legislative language. The geothermal tax credit will be retroactive from January 1, 2009 and will expire December 31, 2016.

This second round of legislation again provides awareness and recognition of the geothermal industry that is much overdue. It’s intent to develop “green” jobs and increase energy efficiency will also bring the technology to the height of awareness in mainstream America and assist in mitigating traditional barriers to purchasing the product.

Here is the reference I was referring...

25C-Nonbusiness Energy Property
       (d)  Residential Energy Property Expenditures
             (2)  Qualified Energy Property
                    (C)  Requirements and Standards for Air Conditioners and Heat Pumps
                           (ii)  in the case of geothermal heat pumps
                                 (II)  shall include evidence that water heating services have been provided through a desuperheater or integrated water heating system connected to the storage water heater tank

Here is my caveat...it's pretty tedious cobbling together the markups to the code the way these bills are written.   So, it's entirely possible this could have been eliminated and I simply missed the removal or replacement.  I'm trusting there are enough eyes looking at this to flush out anything that get's missed.

Geothermal for a residence falls under corde Sec 25D.
You can see it here -
http://www.northeastgeo.com/pdf/code25D.pdf
it is separate from other kinds of heat pumps.
If you go to -
http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.+1:
and look at the last bill, number 8, and go to Subtitle B--Energy Incentives (do a find and go to that section).
Then look at SEC. 1122. MODIFICATION OF CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.
It basically states that the old law said
(b) Limitations.
(1) Maximum credit.
The credit allowed under subsection (a) (determined without regard to subsection (c) ) for
any taxable year shall not exceed— 7 ,
(A) $2,000 with respect to any qualified solar water heating property expenditures, 9
(B) $500 with respect to each half kilowatt of capacity of qualified fuel cell property
(as defined in section 48(c)(1)) for which qualified fuel cell property expenditures
are made 10 , 11
(C) $500 with respect to each half kilowatt of capacity (not to exceed $4,000) of
wind turbines for which qualified small wind energy property expenditures are made
13 , and
(D) $2,000 with respect to any qualified geothermal heat pump property
expenditures.
and the new law says
`(1) MAXIMUM CREDIT FOR FUEL CELLS- In the case of any qualified fuel cell property expenditure, the credit allowed under subsection (a) (determined without regard to subsection (c)) for any taxable year shall not exceed $500 with respect to each half kilowatt of capacity of the qualified fuel cell property (as defined in section 48(c)(1)) to which such expenditure relates.'.

So what does that mean? As I read it solar, wind, and geothermal pumps have no limitation on their their 30% refund, it is purely 30%. The only thing that has a limitation is based on the cost of installing fuel cells for holding energy, which is not related to geothermal, but might interest people doing wind and solar projects.
The fact that it strikes the language of the limitations comes under my interpretation as retroactive to 2008 installs, just like the original bill that was capped. Also, it means the credit stays the same - nonrefundable with carry forward.
What does nonrefundable with carry forward mean? For example, say you made enough that after deductions, you owed $3,000 in taxes, and had a $15,000 geo install which means you have $4,500 in credit. So let's say you had $4,000 with-held in payroll taxes. Well you'd get refunded the $4,000 in payroll taxes, plus the $3,000 you owed because your credit reduces your liability to 0 (so uncle sam sends you 7,000). Then, since your credit 4500 minus your taxes 3000 is 1500 you can take $1500 off your 2009 return when you file that.

Looks like you'll have to amend your inadvertant claim of a heat pump for 2008 Seneca, as we used up your propane and didn't put the DSH in service 'til 2009.
J

man I hope so
The only problem I see is the cap stated on Form 5695
The carry forward on this years taxes would be based on the 2k max
People being what they are I expect next years revised form to read the same with the exception of the 2 k whited out
If thats the case this years form instructs you to use you previous years 5695 to find what the balance would be
If they were to do what you say they would have to rewrite this years form ( not going to happen as many allready submitted )
or rewrite where you are getting your carry forward numbers from

This will re-write this year's form. I've seen it done for forms that have a lot more filers than the 5695. If you've filed already, you'll want to wait for the new release of form 5695 and your or your accountant's software to be updated to reflect this change, and then you'll want to file an amended return.

If you incorrectly characterized your equipment as in service for '08, you would have to amend and return the $2,000. Next year of course you could apply for the credit for systems that were not complete until 2009. I have more than one customer who's DSH is or was not hooked up until their stock of propane is (was) exhausted (local LP pirates won't buy back unused gas). If those folks inadvertantly applied for the credit in 2008, they should ammend their returns. Though if they don't want too, the worst case penalty for getting caught claiming early, would be a bigger check.
j

All I see is the requirement (ii) meets the requirements of the Energy Star program which are in effect at the time that the expenditure for such equipment is made.
Does Energy Star really require a desuper heater?

http://www.energystar.gov/ia/partners/product_specs/eligibility/geo_heat_pump_elig.pdf
Looks like. Technically it says that it needs to provide some domestic hot water. So, if you opened the valve in 2008 it can qualify. If there becomes a hang up on the credit not being retroactive, then I'll have to go with it being turned on in 2009.

At least 1 time I found definition of placed into service as being the cust has full use of the system
So a desuperheater being left off to burn off fuel makes perfect sense to me