Federal tax credits for geothermal heat pumps were recently reinstated by the federal government.
Residential consumers are eligible for a 30 percent federal tax credit for installing a geothermal heat pump system in their home. The reinstated tax credits are retroactive to January 1, 2017, meaning that anyone who installed a geothermal system in their home in the past 14 months now qualifies for the tax credit. The tax credits are extended through January 1, 2022, when a phase out plan reduces the credit to 22 percent before ending.
The geothermal tax credit was part of a measure to extend the tax incentives to renewable energy technologies like geothermal heat pumps, combined heat and power systems, small wind systems, and fuel cells, that were taken out of the legislation passed by Congress two years ago, extending the tax credits for the solar industry.
In addition to the residential tax credits, there is also a 10 percent investment tax credit for commercial geothermal systems that was also extended.

The National Rural Electric Cooperative Association joined with a coalition of many national and state organizations to support reinstatement of the tax credits. The cooperatives are appreciative of the efforts of Representative John Shimkus and several other Illinois Congressmen who sponsored legislation leading to the tax credit reinstatement.

The tax credit extension was part of the Continuing Resolution action by the Congress in early February to fund the federal government.

“We are appreciative of our leaders’ support for geothermal heat pump technology and providing parity with the other renewable energy technologies,” said John Freitag, executive director of the Geothermal Alliance of Illinois. “Geothermal heating and cooling is by far the most efficient and effective way known today to heat and cool our homes and businesses. The tax credit extension helps to make installation of a geothermal heat pump the obvious best choice for heating and cooling.”

Geothermal works like your refrigerator. Your fridge removes heat from its interior and transfers it to your kitchen. A geothermal heat pump uses the same principle, but it transfers heat from the ground to your house, or vice versa.

It does this through long loops of underground pipes filled with a liquid of water or an antifreeze solutions. The loops are hooked up to a geothermal heat pump in your home, which acts as both a furnace and air conditioner.
A geothermal heat pump will immediately save you 30 to 60 percent in your heating and 20 to 50 percent on your cooling costs compared to conventional systems. With a geothermal heat pump, there’s no on-site combustion and no emissions of carbon dioxide, carbon monoxide or other greenhouse gases. Geothermal heat pumps can be installed in new construction and retrofit situations. Retrofits do require ductwork modifications.
A geothermal system may cost as much 40 percent more than a traditional HVAC system. Some of these costs can be recouped through tax credits and energy savings.

Installation costs vary depending on site accessibility and the amount of digging and drilling required. Professional installation is needed for sizing and design. Eastern Illini Electric Cooperative works with many qualified geothermal system installers, so give us a call and we can provide you with additional information.