Program Overview
- Provides a tax credit for 30% of the purchase and installation costs of a geothermal ground coupled heat pump system, up to $9,000.
- Available for systems installed through December 31, 2034.
- Total tax credits capped at $8 million per year ($4 million for personal income tax and $4 million for corporate income tax).
Who is eligible?
- New Mexico taxpayers who install a geothermal heat pump system by December 31, 2034.
What is offered?
- Refundable income tax credit for up to 30% of the purchase and installation costs, up to $9,000.
How Can I Apply?
- Purchase and install a geothermal heat pump.
- Apply for a certificate of eligibility from the Energy, Minerals, and Natural Resources Department.
- Include the certificate of eligibility when filing state taxes with the New Mexico Taxation and Revenue Department.
What is a Geothermal Ground Source Heat Pump?
Geothermal ground coupled heat pumps (also called geothermal heat pumps or ground source heat pumps) take advantage of the relatively stable temperatures underground to efficiently heat and cool buildings.
Temperatures about 30 feet below the Earth’s surface remain relatively constant year-round. For New Mexico, this means that soil temperatures are usually warmer than the air in winter and cooler than the air in summer. Geothermal heat pumps use electricity and an underground heat collector loop to exchange heat belowground, providing reliable heating in winter and cooling in summer. Geothermal heat pumps among the most efficient heating and cooling technologies available.
Image credit: U.S. Department of Energy. (n.d.). Geothermal heat pump system diagram [Image]. Energy.gov. link
Eligibility Guidelines
Eligible Equipment:
- Fully operational geothermal ground coupled heat pump systems with Coefficient of Performance (COP) ≥3.4 or Energy Efficiency Ratio (EER) ≥16.
- Installed by a certified professional recognized by the International Ground Source Heat Pump Association (IGSHPA) or a similar authority.
Eligible Properties: New Mexico residences, businesses, and agricultural properties who files a New Mexico income tax return.
Required Documents
- Proof of property ownership (deed, mortgage statement, or property tax bill)
- Itemized invoice from installer listing equipment and labor costs
- Heat pump manufacturer documentation (model, specifications, and performance ratings)
- Installer certification from IGSHPA (International Ground Source Heat Pump Association) or a similar authority
- Final passing inspection report from the local building authority
- System design schematic and technical specifications
Frequently Asked Questions
When is the tax credit available?
The tax credit is available for systems installed between May 15, 2024 through December 31, 2034.
Is there a deadline to apply and claim a tax credit?
Yes, an application must be submitted within one year of purchase and installation of the geothermal ground coupled heat pump.
Who is eligible for the tax credit?
Owners of New Mexico residences, businesses, or agricultural enterprises may claim the tax credit for geothermal ground-coupled heat pump systems installed on properties they own.
What is the maximum tax credit?
The credit, which may not exceed $9,000, is available for up to 30% of
the purchase and installation costs.
What if the tax credit exceeds my tax liability?
The taxpayer will receive a refund in the amount of the tax credit that exceeds their income tax liability.
Is the tax credit transferable?
No, the tax credit is Non-Transferable: this credit cannot be transferred, sold, or exchanged as a business asset
What is there a maximum funding cap?
A maximum annual aggregate of $8 million in geothermal heat pump tax credit is allowed ($4 million for personal income tax and $4 million for corporate income tax).
Can I combine this tax credit with the New Mexico Sustainable Building Tax Credit?
The Sustainable Building Tax Credit may not be used in combination with the Geothermal Ground Coupled Heat Pump Tax Credit for the same heat pump installation
Can I share this tax credit with other business owners?
Yes, If multiple taxpayers own an interest in the property through a partnership or business association, each may claim a tax credit only in proportion to their ownership interest. The application must identify each taxpayer on proof of property ownership when applying for the credit. This transaction is completed utilizing Taxation and Revenue Department Business Entity Only – Disclosure of Ownership Interest Schedule A form.
What if I file separately from my spouse?
Married couples filing separately can each claim half of the tax credit. The application must identify each taxpayer on proof of property ownership when applying for the credit.
What if my business is a corporation?
The credit, which may not exceed $9,000, is available for up to 30% of the purchase and installation costs.
What items are covered by the tax credit?
To be eligible for the geothermal ground-coupled heat pump income tax credit as an new, or upgrade or expansion of an existing system, the project must include the installation of a new heat pump that functions as an active component of the expanded system. To be eligible, the newly installed heat pump must be integrated into the operational infrastructure of the system, contributing directly to its heating and cooling performance. The tax credit will cover only the cost of materials and installation of items directly connected to the system and that are necessary for the system to function as intended.