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Geothermal System Installation Incentives

Earth River Geothermal - Geothermal Heating and Cooling - Annapolis, Maryland

In today’s time, when pollution has become a growing concern, a large number of people are opting for environmentally friendly methods. Nowadays, geothermal heating and cooling system are being adopted. Besides the environmental benefits, property owners who install geothermal systems are liable to receive tax credits, grants, and incentives. There are various aspects of the policies regarding tax credits, grants, and incentives, be it in a local area like Anne Arundel County or at the state level like Maryland, or at the Federal level like the United States. The details regarding the incentives, tax credits, and grants are giving below for a better understanding.

Anne Arundel County:

In the locality of Anne Arundel County, there is a one-time credit offer. This offer from the county property taxes is applicable for residential dwellers that are known to use geothermal and solar energy. The energy is used for the purpose of heating and cooling along with the equipment being used generating electricity and water heating. Though at the start, Photovoltaic (PV) systems along with geothermal systems were not actually eligible to receive a tax credit, this eventually changed. In January 2009, (County Bill 81-08) the Photovoltaic (PV) system was added by the legislation. In the next year, in April 2010 (County Bill 17-10), the legislation also added the geothermal heating and cooling systems under the tax credit.

On the other hand, in the Anne Arundel County, to avail tax credits on the solar energy devices, the owner should have installed the device after January 1, 2007, only then they will be eligible for tax credits. But the important point to note here is that any expenditure incurred for the purpose of maintaining a solar pool heater will not be eligible or applicable for tax credits.

The calculation carried out for the tax credit for the one-time offer is as follows:

  • Half of the cost of installation and materials pertaining to the equipment for solar energy minus the cost of the state and federal grants along with the solar energy tax credits.
  • Or, the amount could be just $2,500.

Moreover, the state of Maryland allows local governments to grant property tax credits. They can offer this for high-performance structures if they want to. The Anne Arundel County exercised this option in the year 2010 (October). The enacting legislation (County Bill 78-10) started providing the property tax credit to the dwellers of high performance that have been established on 1st July 2010 or after that, which are either meeting or exceeding the USGBS LEED Silver standards. This credit was applied in 2012 (County Bill 03-12), which was to be added in the National Green Building Standard (NGBS). Moreover, it was added to the tax credits under the eligibility of the Green Building Certification System. The eligibility for the tax credit is valid for five years and the calculation for this is done as per the percentage. This percentage depends on the county property taxes, which are owned by the dwellers, but not the landowners. More importantly, a number of incentives vary on the level of performance of the building. This is determined by the applicable rating system, which is:

  • NGBS or LEED Silver: 40% of taxes that is owed up to $1,000
  • NGBS or LEED Gold: 60% of taxes that is owed up to $2,000
  • NGBS Emerald or LEED Platinum: 80% of taxes that is owed up to $3,000


Recently, the Maryland Smart Energy Communities (MSEC) had announced the program for the financial year 2016 (FY16). In the FY16, the MSEC intends the budget of the program to be around $2.5M, which will further be divided amongst the new and the existing communities of MSEC. The budget program also states that $600K is the amount that is eligible for energy efficiency initiatives. The program further states for a transportation project and renewable energy where the amount $900K is eligible. Moreover, for energy efficiency projects, $1M is eligible. This budget is aimed at serving people of Marylanders who fall into the bracket of low-to-moderate income.

Furthermore, the MEA announced the name of the 34 smart energy communities in Maryland. These 34 communities include around 2 incorporated municipalities along with 7 counties. It also includes the Baltimore City. All the communities mentioned have shown excellent leadership in the aspect of managing smart energy. The main aim of this program is to encourage the local government to adopt and commit to policies for the long term. These policies will further lead to energy saving along with opportunities for the development for renewable energy. It is through their participation that these communities will be receiving grants for the purpose of funding energy efficiency, to clean transportation projects, and renewable energy. The smart energy communities of Maryland can improve the environment, save of cost, and encourage better and improved decision for environment. This program comes with a number of benefits for the local of Maryland. The communities get a grant from the MEA to start their own energy goals and are eligible for MSEC grants in the future. The fuel and utility expenses will be reduced. The initiatives for local sustainability are supported and a reduction in greenhouse emission. Moreover, the program would grant a statewide recognition were the community will be considered as a leader in sustainability and energy. Lastly, the community will be aided in technical matters y the University of Maryland Environmental Finance Center, which will help the program to meet its requirements along with meeting energy goal for long term.

This program is available to incorporated towns, counties, and cities that are not yet been accepted by the MSEC program. Any community can apply for this program and who meet all the three deliverable requirements will eventually receive funding that will depend on the population size and the funding available. In the case of full project funds, communities that have completed all the deliverable which are specified by the MEA will receive the funding.

Goals of Maryland Energy Efficiency, Post- 2015:

In the state of Maryland, the Public Service Commission (PSC) established the energy efficiency goals under the Order 87082. The previous program named, EmPOWER Maryland Act was scheduled to expire towards the end of 2015. Once the EmPOWER Maryland Act expired, the goals established by the PSC would take effect.

The goal provides an outlines the energy efficiency goals for natural gas utilities. There are programs that target limited-income families and household. Moreover, the working class and the limited-income household that are connected with natural gas are needed to develop and also recommend goals for saving energy before February 2016.

Federal Tax Credits:

Installing green energy system is extremely important and gaining significance. Geothermal heat pumps are quite similar to the ordinary heat pumps. But the geothermal HVAC system will actually use the ground as opposed to a normal pump that uses the outside air. Like a normal pump, geothermal HVAC too provides air conditioning, heating and in most of the case it also provides hot water. It is a fact that the geothermal system is the extremely efficient and has a more comfortable heating and cooling system that is available. This has encouraged the United States federal government to enact a 30% tax credit without any upper limit.

The 30% tax credit at the installation of any ground source heat pump also known as the geothermal system with no cap was actually enacted in the year 2009. The tax credit includes the installation or labour cost.

A responsible taxpayer who is a dweller and is located in the United States is eligible to claim a credit of 30%. With regards to the equipment, the expenditures are treated when the installation is all completed. Moreover, if the installation is done at a new place or a new house the ‘placed in service’ will have a date and the one that is used is the date of the occupancy by the owner. The tax credit includes on-site preparation of the labor, assembling and original installation of the system, and also wiring or piping for the purpose of interconnecting home with the system. If a situation arises that the tax credit exceeds the tax liability, the balance amount will be carried forward to the subsequent year. Moreover, aspects like maximum allowable credit, requirements of the equipments and many such other details will vary depending on technology used.

The details regarding the tax credits for geothermal installation are given below:

  • The system placed after 2008 have no maximum credit.
  • To be eligible, the systems need to be placed in service either on January 1, 2008 or after that and on December 31, 2016 or before that.
  • It is necessary for the geothermal heat pup to meet the federal Energy Star criteria.
  • Lastly, it is not absolutely necessary for the taxpayer to install or serve the system in their principal residence.

Tax credits, grants, and incentives that are mentioned above are designed to encourage low-to-medium income households to adopt more eco-friendly methods of heating and cooling. These tax credits are aimed at providing some amount of financial relief.


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