Both the US and Canadian governments offer generous incentives to businesses that upgrade to geothermal heating and cooling systems in new builds and retrofits.
GOVERNMENT GRANTS AND INCENTIVES
In the USA:
New Construction Example with 50% Bonus Depreciation:
A corporation spends $1,000,000 to install a geothermal heat pump system in its new office building. They moved into the building during the 4th quarter of 2010. The corporation is in a 40% tax bracket when state income tax is included.
2012 Tax Credit:
$1,000,000 x 10%
= $100,000
Depreciable Basis:
$1,000,000 – ($100,000 / 2)
= $950,000
2012 Tax Credit:
$1,000,000 x 10%
= $100,000
2012 Bonus Tax Benefit:
$950,000 x 50% bonus x 40% tax rate
= $190,000
2012 MACRS Tax Benefit:
$475,000 x 5% Q4 MACRS x 40% tax rate
= $9,500
2012
$475,000 x 38% MACRS x 40% tax rate
= $72,200
2013
$475,000 x 22.80% MACRS x 40% tax rate
= $43,320
2014
$475,000 x 13.68% MACRS x 40% tax rate
= $25,992
2015
$475,000 x 10.94% MACRS x 40% tax rate
= $20,786
2016
$475,000 x 9.58% MACRS x 40% tax rate
= $18,202
Total Tax Savings over 5 Years
= $480,000
In Canada:
According to CCA 43.2 Revenue Canada:
Year One – 25%;
Year Two – 35%;
Year Three – 18%
Example for New Construction:
A company spends $100,000 on a geothermal mechanical system. Tax Bracket is 30%.
Year One
$100,000 x 25% x 30%
= $7,500
Year Two
$100,000 x 35% x 30%
= $10,500
Year Three
$100,000 x 18% x 30%
= $5,400
Total Incentive (Tax Saving) over 3 years
= $23,400
Depreciation can be carried forward.
