For one more year, North Carolina residents have a chance to save up to $8,400 off the cost of a new Geothermal heating and cooling system. That’s the maximum amount of the North Carolina Geothermal Tax Credit that is set to expire at the end of 2015.
North Carolina Geothermal Tax Credit Basics
The North Carolina Geothermal Tax Credit is part of the state’s renewable energy tax credit program. Here are the basic details of the credit:
• 35% tax credit
• Maximum credit of $8,400 per system
• Residential properties only
• Geothermal equipment for heating and cooling your home or water heating.
• System must be in service by December 31, 2015.
The tax credit has some additional restrictions. It cannot exceed 50% of your North Carolina tax liability for the year you take it. But you’ll be able to carry over any additional tax credits to use over the next five years. So if, for example, you owe North Carolina $8,000 in income taxes each year, you could only take $4,000 of the tax credit for the 2015 tax year, but you could then take another $4,000 for 2016 and the final $400 for 2017.
How the Tax Credit Makes Geothermal a Great Value
To claim the maximum North Carolina tax credit, your new geothermal system (including installation) would have to cost $24,000 or more. Costs of geothermal systems vary greatly depending on the size of your home and the installation of the loop system. A system costing $24,000 would not be unusual, but installation could easily cost more or less.
For purposes of illustrating the savings from the North Carolina tax incentive, lets just assume that the cost of installing the geothermal system is $24,000. Here’s what your actual installed price will look like after tax rebates.
Everyone qualifies for a federal tax credit when installing a geothermal system before the end of 2016. The federal tax credit is equal to 30% of the installed price of the system.
$24,000 System Price
-$ 7,200 Federal Tax Credit
Until the end of 2015, North Carolina residents receive the state 35% tax credit.
$16,800 Cost after Federal Tax Credit
-$ 8,400 NC Tax Credit
=$8,400 Final Cost
In this example, the North Carolina tax credit results in the geothermal system costing exactly half as much in 2015, as it would if installed at the same price in 2016, after the tax credit expires. The NC tax credit also brings the cost of installation down to what you might pay to install a conventional, but less efficient, HVAC system in the same home.
Why it is important to act quickly
One of the most important requirements for the tax credit is that the geothermal heating and cooling system be installed and in service by December 31, 2015. This means that time is running out to start the process of getting a geothermal system installed in your home.
There are two main reasons that you need to get started as soon as possible to make sure you can take advantage of the $8,400 in savings.
1. Geothermal systems take longer to install
2. We anticipate strong demand that could lead to an installation backlog
It takes longer to install a geothermal heating and cooling system into a home than a traditional central air conditioner, furnace or heat pump. The main reason is that geothermal systems operate differently from traditional systems. Traditional systems take outdoor air and either heat or cool it to make your home comfortable. Geothermal systems take advantage of the near constant temperatures underground to more efficiently maintain a comfortable temperature in your home. That’s where a lot of the extra installation time comes into play. Installing the underground or underwater loop that will use the energy from the ground to heat and cool your home more efficiently takes additional planning and installation steps. Proper load calculations have to be performed to determine how much loop will be needed. Each home site will have different options for installation of the loop. Time will be needed to go over the lot, determine where utility lines, septic fields or other obstacles are and where the loop can be safely installed. Then the installation of the loop will take some time. Underwater loops are usually quicker to install than horizontal loops or vertical loops. When vertical loops are needed, more specialized equipment used to drill holes deep down into the ground is needed. As this type of work is time consuming and the number of qualified drillers is limited, rising demand could extend the length of time it takes to complete installation of the system.
Additionally, geothermal installations require specialized knowledge. Our geothermal installers have undergone hours of specialized training and have years of experience installing geothermal systems. We cannot and will not use installers without the required training and experience on our geothermal installations, so if you wait until too late in the year, we may not be able to schedule your installation in time to have your system up and running by the end of the year deadline.
If you are considering installing a geothermal system in your present home or one you are building during 2015, we suggest you give us a call today at 803-327-2700. Contacting us now will allow us to give you a complete quote, and schedule your installation so that we can be sure you qualify for the North Carolina tax credit.