Things You'll Need

Instructions

Preparation

1

Ensure your geothermal heat pump qualifies for the residential energy efficient property tax credit. The IRS requires that the unit have Energy Star accreditation and be installed in your U.S.-based home, although the home does not have to be your primary residence.
2

Retain a copy of the invoice detailing the cost of your geothermal heat pump, including labor and installation costs, for your tax preparation process.
3

Obtain a copy of IRS Form 5695 -- Residential Energy Credits and IRS Form 1040 -- U.S. Individual Income Tax Return. Forms are available for download from the website IRS.gov, or in hard copy from libraries and post offices.

Calculate the Credit

1

Insert the geothermal heat pump invoice amount on Form 5695, Part II, Line 15.
2

Add Lines 12 through 15 and enter the result on Line 16, to arrive at the total for all energy efficient residential property you installed during 2010.
3

Multiply the total on Line 16 by 30 percent to arrive at your residential energy efficient property credit. Enter the credit amount on Line 17.
4

Add Line 17 to the credit for qualified fuel cell property costs, if any, on Line 21 and any credit amount carried forward entered on Line 22. Enter the result on Line 23.

Calculate Other Tax Credits

1

Enter your tax amount from Form 1040, Line 46 on Line 24 of Form 5695.
2

Add all credits from Form 1040, lines 47 through 50; Form 5695, Part I, Line 11; Line 12 of the Line 11 Worksheet from Publication 972 -- Child Tax Credit; Part I, Line 11 from Form 8396 -- Mortgage Interest Credit; Part II, Line 18 from Form 8839 -- Qualified Adoption Expenses; Part IV, Line 11 from Form 8859 -- District of Columbia First-Time Homebuyer Credit; Section C, Line 22 from Form 8834 -- Qualified Plug-in Electric and Electric Vehicle Credit; Part III, Line 21 from Form 8910 -- Alternative Motor Vehicle Credit; Part III, Line 14 from Form 8936 -- Qualified Plug-in Electric Drive Motor Vehicle Credit; and credit calculated from Publication 524 -- Credit for the Elderly and Disabled.
3

Insert the total of all credits calculated above on Line 25, Form 5695.
4

Subtract the total of all credits included on Line 25 from your tax amount inserted on Line 24. Enter the result on Line 26.

Calculate Current Year Energy Credit

1

Enter the smaller of Line 26 or Line 23 on Line 27 to find your residential energy efficient property credit allowable for the 2010 tax year.
2

Subtract Line 27 from Line 23 to arrive at any credit amount that will carry forward to future tax years. Enter the total on Line 28.
3

Add Part I, Line 11 and Part II, Line 27 to calculate your total energy credits for 2010, and enter on Line 29.
4

Enter the total on Line 29 and transfer to Line 52 on Form 1040.