IRS Form 5695 is the energy saver’s dream. If you own a home and have installed energy-saving components to your home, the IRS will shave dollars right off your tax bill, in the form of the Residential Energy Credit. It’s a dream because applying energy-saving devices and systems to your home is a savings in itself. Getting a tax credit just adds one more reason to go for it and make your home more energy efficient.
One of the largest overhauls you can do for saving on energy costs in your home is to install a geothermal heat pump. This means your home will be heated and cooled by the earth. You see, if you go down deep enough, the dirt is a constant temperature of around 55 degrees Fahrenheit. That means, if you send pipes down to bring that air up into your home in winter, it will heat your home. In summer, it will cool your home.
Air that cools or heats your home is brought up from the ground, so it’s transported, not created. That means nothing is burned…no oil, no gas, no wood. It’s totally clean! In fact, you don’t get any cleaner, cost-effective or efficient than a geothermal heat pump system in your home. The EPA says so.
That’s why the IRS likes it too. You can deduct 30% of the cost of your geothermal installation, which is quite a lot. These systems cost around $25,000 to install. Therefore, a 30% credit is going to be worth almost $8,000. The geothermal tax credit is going to give you the most bang for your buck on IRS Form 5695.
What’s more, you can apply the Residential Energy Credit to your vacation home as well! This is not the norm for the IRS. But this whole great opportunity is going to go away in 2016, unless extended once again by Congress. If you’re thinking about a Geothermal Heat Pump in your home, now’s the time for sure.