Gethermal Heat Pump Problem

[dyne]

Assume that a client paid $16,000 to have a qualified geothermal heat pump installed which was listed on line 15 of form 5695. This generated an energy tax credit which will eliminate his federal tax for the next five years or thereabouts. It is a system which removes heat from the ground and puts heat back into the ground to heat and cool his house. This system reduced his heating and cooling expense by about 50%. About a year later the system broke down and the installer will not repair it. The problem was that pipes buried in the ground were not properly installed or insulated, etc. If he must spend $4,000 to repair the system, is this simply a non-deductible repair expense or is it an additional energy tax expenditure which will increase his energy tax credit carryover? This would be additional basis in the system.

[BOB W]

Assume that a client paid $16,000 to have a qualified geothermal heat pump installed which was listed on line 15 of form 5695. This generated an energy tax credit which will eliminate his federal tax for the next five years or thereabouts. It is a system which removes heat from the ground and puts heat back into the ground to heat and cool his house. This system reduced his heating and cooling expense by about 50%. About a year later the system broke down and the installer will not repair it. The problem was that pipes buried in the ground were not properly installed or insulated, etc. If he must spend $4,000 to repair the system, is this simply a non-deductible repair expense or is it an additional energy tax expenditure which will increase his energy tax credit carryover? This would be additional basis in the system.

This is a repair. Only initial installs are elegible for the credit. Your client has a legal claim against the installer. Tell him to go to Small Claims Court and file a claim.