Has anyone encountered this guidance on the tax credit?  Until reading this it was my understanding that the tax credit was taken on the entire cost of the system including ground heat exchanger, equipment, piping, ductwork, controls, etc.


http://tinyurl.com/geotaxcredit

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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.

This is one persons interpretation. So what qualifications does this person have? What precedents is he using to develop his interpretation? I would throw that interpretation in the trash unless he has some rulings to back it up. The IRS Guidance you posted doesn't say that. What it says is very vague - probably purposely.

The ugly truth on tax laws is that we really don't know what is "legal" and therefore "correct" until it has been litigated a few times due to either taxpayers or IRS agents having their interpretation challenged in court.

I figure if you have your contractor give you a bill for the geo system then everything on that bill is covered because it is all part of the geo equipment and the geo won't work right without it. Probably a good reason for contractors to not break out costs though.

The is no definitive guidance out on this yet (I am sure there will be when the IRS finds out what people will be claiming).

The only help for now maybe the Energy Star Specification here-

http://www.energystar.gov/ia/partners/prod_development/revisions/downloads/geothermal_heat_pumps/ES_V3.0_Geothermal_Heat_Pump_Specification.pdf


Energy Star defines a GHP as-

A. Geothermal Heat Pump: A geothermal heat pump uses the thermal energy of the ground or groundwater to provide residential space conditioning and/or domestic water heating. A geothermal heat pump model normally consists of one or more factory-made assemblies that include indoor conditioning and/or domestic water heat exchanger(s), compressors, and a ground-side heat exchanger. A geothermal heat pump model may provide space heating, space cooling, domestic water heating, or a combination of these functions and may also include the functions of liquid circulation, thermal storage, air circulation, air cleaning, dehumidifying or humidifying. A geothermal heat pump system generally consists of one or more geothermal heat pump models, the ground heat exchanger(s), the air and/or hydronic space conditioning distribution system(s), temperature controls, and thermal storage tanks.

Consult your professional tax advisor.

One way you could also read it as... the less detail that is on the invoice the better off you are... If you invoice read installation of 1 geothermal system.. that would be better than x for geo, y for installation, and z for duct-work.