NY State Geothermal Energy System Credit

Administered by: New York State Department of Taxation and Finance Status: Active in 2026 Verified: May 27, 2026 against Geothermal Energy System Credit, NYS Tax Source quality: Primary

What it is

The NY State Geothermal Energy System Credit is a 25% income tax credit on what you spend installing a ground source heat pump system at your residence in New York. The dollar cap depends on when the system is placed in service: $5,000 for systems placed in service on or before June 30, 2025, and $10,000 for systems placed in service on or after July 1, 2025. For any install completed in 2026, the cap you care about is $10,000.

The credit applies to the equipment expenditures for a ground-coupled solar thermal system — one that uses heat stored in the ground or in a body of water to produce heat for residential use. The state's definition is broad enough to cover the common ground source heat pump configurations a contractor will quote you, including loops buried in the yard and water-source designs.

The credit is nonrefundable. If it is bigger than your state tax liability, the unused portion carries forward up to five years. After five years, any remaining balance expires. You can only claim the credit for one system per tax year.

Who qualifies

You own or lease the geothermal equipment installed at a residential property in New York State.
The property was your residence at the time the system was placed in service.
The property was not rented at any time during the year you claim the credit.
For leased equipment, the written lease must run a minimum of 10 years. The credit can be claimed only during the first 15 years of the lease.
You are claiming the credit for one system in the tax year. Two systems on the same return are not allowed.
You have records of the qualified equipment expenditures and the placed-in-service date.

What you get

25% of your qualified geothermal energy system equipment expenditures.
Capped at $5,000 for systems placed in service on or before June 30, 2025.
Capped at $10,000 for systems placed in service on or after July 1, 2025.
Unused credit carries forward up to 5 years against future NY state income tax liability. After year five, any remaining balance expires.
Claimed on Form IT-267 when you file your state income tax return.

These figures come directly from the New York State Department of Taxation and Finance.

How to apply

Install a qualifying ground source heat pump system at your NY residence. Keep the itemized invoice, the placed-in-service date, and any rebate documentation from the utility or NYS Clean Heat.
When you file your NY state income tax return for the year the system is placed in service, complete Form IT-267 (Claim for Geothermal Energy System Credit) and attach it to your return.
Enter the credit on Form IT-201 (or IT-203 for part-year or nonresident filers) per the IT-267 instructions.
If the credit is more than your tax liability, carry the unused balance forward on next year's return. Track the carryforward yourself. The state will not remind you, and after five years the balance is gone.

How this stacks with other programs

With NYS Clean Heat: Geothermal rebates run through Clean Heat at your utility. Those rebates pay you up front, usually through the installer, and reduce your out-of-pocket cost. The state tax credit is calculated on net expenditures after rebates. The two stack, but the 25% is figured on the smaller post-rebate number.
With the federal credit: The federal Residential Clean Energy Credit (§25D), which covered geothermal at 30% with no cap, expired December 31, 2025. See Federal Residential Energy Credits: Program Ended. For systems placed in service in 2026 or later, this state credit is the only tax-credit lever on a residential geothermal install.
With the state solar credit: Geothermal and solar are separate state credits and do not interact. If you install both at the same residence, you claim the solar credit on Form IT-255 and the geothermal credit on Form IT-267.
With utility rebates: Same logic as Clean Heat. Subtract any utility rebate from the install cost before computing the 25%.

What to ask your contractor

What is the placed-in-service date going to be? "Placed in service" means installed and operating, not just contracted or paid for. The date determines whether your cap is $5,000 or $10,000 and which tax year you claim.
Can you provide an itemized invoice that separates qualified equipment expenditures from any non-geothermal work on the same job? IT-267 applies only to the qualified equipment portion.
Which Clean Heat rebate are you filing on my behalf, and what is the rebate amount? You need the net cost figure to compute the credit.
For a leased system, is the written lease at least 10 years? A shorter lease disqualifies you.
Will the system be installed at a property that is rented out at any point this year? A single month of rental during the tax year disqualifies the credit.

Common pitfalls

Wrong residence type. The property has to be your residence when the system is placed in service. It also cannot be rented at any point during the tax year. A summer rental of your primary home for a few weeks will disqualify the entire credit for that year.
Lease under 10 years. A 7-year geothermal lease disqualifies you. The state's threshold is firm.
Claiming the wrong cap. Systems placed in service before July 1, 2025 are capped at $5,000, not $10,000. Check the placed-in-service date on your contractor's documentation before you file.
Double-counting rebates. Including a Clean Heat or utility rebate in your reported expenditures is a common audit trigger. The 25% is calculated on net cost after rebates.
Forgetting the carryforward. The credit is nonrefundable. If you can't use the full credit in year one, track and claim the carryforward yourself for up to five years. After year five, any remaining balance is gone.
Two systems, one year. Only one geothermal system credit per tax year is allowed. A second system at the same address has to wait for next year's return.

Important dates

The credit has no published expiration date as of May 27, 2026. The tax.ny.gov page describing the credit was last updated October 15, 2025, which is when the increased $10,000 cap for systems placed in service on or after July 1, 2025 took effect. Form IT-267 is revised annually; use the current-year version from tax.ny.gov. Carryforwards run five years and then expire.

Source

Geothermal Energy System Credit, NYS Department of Taxation and Finance (retrieved May 27, 2026; page last updated October 15, 2025)
Instructions for Form IT-267, NYS Department of Taxation and Finance (retrieved May 27, 2026; 2025 form revision)

NYSERB.com is an independent research site. It is not affiliated with the New York State Department of Taxation and Finance, the State of New York, or any utility. Verify all program details and incentive amounts directly with the NY State Department of Taxation and Finance before making any financial decision.

Verified against www.tax.ny.gov, www.tax.ny.gov on May 27, 2026.