Geothermal Tax Incentives

• January 3, 2019
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Geothermal Systems Get a Tax Break 

Guess who helped make the installation of geothermal systems more affordable?  The federal government! In January 2018, the Federal Government extended the federal tax credits to 2021, effectively reducing the costs associated with geothermal systems. (Bipartisan Budget Act of 2018).  

As with the previous legislation that expired in 2016, there is a 10% tax credit for commercial geothermal systems.  Bonus – the tax credit also applies retroactively for 2017 installations and includes a five-year accelerated depreciation schedule for commercial geothermal applications. Plus, these federal tax incentives are in addition to any state incentives.

Like all renewable energy sources, initial capital expense has slowed the universal adoption of geothermal energy. However, with the extension of these tax incentives, geothermal systems are more affordable than ever. 

These tax credits allow a commercial building owner to get back 10% of the cost of any geothermal system.  This includes systems, installed or in progress between 2017 and 2021. This “in progress” language makes a significant difference. This means you can start a project late in any year through 2021, and even though it may not be operational by year end, it will still qualify for the tax credits. 

Additionally, for qualified geothermal systems placed in service after September 2017 and before 2023, 100% of the asset can be expended in the year it is placed in service. Geothermal systems placed into service between 2023 and 2026 are subject to a five-year decreasing accelerated depreciation schedule based on the year it is placed in service (80%, 60%, 40%, 20%). 

Tax credits and accelerated depreciation make the best sustainable energy even better.