Commercial Geothermal Savings and the Federal Tax Credit in Oklahoma

I am Dave Hartzell. Forty seven years in HVAC, 15+ years running Hartzell’s Heat & Air in Kingfisher. When a building owner calls me about geothermal, the first question is always the same: what does the federal government put back in my pocket.

Commercial geothermal does not run on the residential tax rules. It runs on Section 48, the investment tax credit, and that is a much stronger place to be standing.

Section 48 is the code section, and 48E is not the one

Commercial geothermal heat pump property is eligible under Section 48. Section 48E, the technology neutral credit, covers zero emissions electricity generating facilities and storage placed in service after 2024. Real credit, wrong page of the code for a ground loop heat pump in an office, clinic or school.

It is a tax credit, not a rebate

A rebate comes off the invoice. A credit comes off tax liability. I hand you a contract for the full price of the system. The credit shows up when your return is filed, and only if your tax position can use it. Nobody knocks money off at signing.

I install it and document what it is. Your CPA claims the credit and confirms what your business actually receives.

The rate is set by when construction begins

The schedule does not run off the day you turn the system on. It runs off the year construction begins.

Read one row across, never down, and never add the columns together. The base rate and the increased rate are two alternatives, and a project gets one, not both. The ceiling column is what that row can reach if the increased rate applies and both adders are independently earned. It is a ceiling, not an expectation. Every number in that table gets confirmed by your CPA against your actual return, not by me. I will not tell you what you are going to receive.

Geothermal held 30% through 2032 while wind and solar were cut back faster. That is not an urgency play, it is a published schedule.

Under 1 MW is usually the path for Oklahoma buildings

Prevailing wage and apprenticeship, PWA for short, is the normal way to earn the increased rate. There is a second path, and it usually matters more. A facility with maximum net output below 1 MW is excepted from the prevailing wage and apprenticeship requirements entirely, and can receive the increased rate without independently satisfying them. That line is bigger than it sounds, and much of the Oklahoma commercial work I see sits under it. I confirm it against the designed system, never assume it.

The two adders are conditional, not automatic

Each adder is worth 10 percentage points only under a condition, and 2 points without it.

• Domestic content, +10 points or only +2. Full value only if the project also satisfies PWA, is under 1 MW, or began construction before January 29, 2023. Otherwise it is 2 points. Either way it is settled at equipment selection: the steel, iron and manufactured product thresholds narrow which units can go on the job.
• Energy community, +10 points or only +2. Same condition. Purely location based, and qualification is determined at the placed in service date, subject to the beginning of construction continuity rules. It has to be checked on the IRS and DOE mapping tool for that exact address. Not the county, not close enough, not a guess. I pull up the map and check your specific building.
• PWA changes what the install costs to staff. Real requirement, real recordkeeping, and it belongs in the budget conversation first.

What the building saves after the tax year is over

The credit is a one time event. The energy number repeats every month for the life of the building. Geothermal cuts roughly 50% of HVAC energy use. Not 50% of your utility bill, and I will not let anybody sell it that way, because a commercial bill also carries lighting, plug load, refrigeration and demand charges I do not control. What I control is the HVAC portion, and that is where the cut lands.

A rooftop unit fights 105 degree Oklahoma air in July and 15 degree air in January. Geothermal trades heat with ground that holds steady all year. At a COP of 4.5 that is about $4.50 of heat for every $1 of electricity. Run the geothermal vs Trane 18 SEER calculator to see it side by side.

What stops living on your roof

• Nothing outside to vandalize. No coils to strip for copper, no condensers sitting out back at 2 a.m.
• Nothing outside to hail. One Oklahoma hailstorm can flatten a bank of rooftop units and cost you capacity in a heat wave.
• Nothing to crane back onto the roof. Rooftop equipment is designed around a 15 year life. A ground loop is engineered on a 50 year design life, so when the heat pump wears out, the loop stays and the equipment is replaced at floor level.

Fewer outdoor failure points means less downtime and less maintenance. Geothermal also holds capacity on the days conventional equipment loses it, and a tenant who never emails about the temperature is a tenant who renews. It is premium equipment, priced that way, and it earns that back through energy, equipment life and the credit. The loop drives the project, so closed loop vs open loop is the first fork.

Depreciation is real, and it belongs to your CPA

There is a depreciation side to a commercial geothermal investment and it interacts with the credit. It is real, and it is not something I am going to compute for you. That calculation belongs to your CPA, working from your return, entity structure and tax year.

The residential credit ended. Commercial did not.

If you are reading this for your house instead of your building, here is the straight answer: the residential federal credit is gone. Section 25D was disallowed for expenditures after December 31, 2025, so there is no residential federal geothermal credit for a system placed in service in 2026. Paying in 2025 does not preserve it if the install finishes in 2026.

Commercial is a different section of the code and it is still alive out to 2034. Homeowners, ask me which Oklahoma utility rebates are active, and is geothermal worth it in Oklahoma walks through the operating case.

Questions I get from building owners

How much is the federal tax credit for commercial geothermal in Oklahoma?

For construction beginning 2026 through 2032, Section 48 gives a 6% base rate, or 30% when prevailing wage and apprenticeship rules are met or the system is under 1 MW. Domestic content and energy community each add 10 percentage points when their conditions are met, for a 50% ceiling. Your CPA confirms what your return can use.

When does the commercial geothermal tax credit go away?

It steps down by the year construction begins. The increased rate holds at 30% through 2032, then 26% in 2033, 22% in 2034, and 0% after December 31, 2034. The base rate runs 6%, 5.2%, 4.4%, then zero.

Do I have to meet prevailing wage rules to get the 30% rate?

Not always. A facility with maximum net output below 1 MW is excepted from the prevailing wage and apprenticeship requirements and can reach the increased rate without independently satisfying them. Most Oklahoma commercial projects fall under that line, but I confirm it, never assume it.

How much does a commercial HVAC diagnostic cost in Kingfisher Oklahoma?

For a commercial system the diagnostic is $389 flat, day or night, up to 15 tons, with no after hours uplift. Larger systems get sized on site, and an estimate on a new system is free.

Let me check your actual address

Geothermal is the one thing I go statewide for. I have run jobs from Kingfisher, Okarche and Watonga out to Oklahoma City, and as far as Lawton, Broken Bow and Durant. One shop, in Kingfisher, and I drive to you.

The energy community adder is decided by a map. Give me the address and I will check it, look at what you are running, and tell you what a real project looks like. Your CPA takes the tax side from there. Background: commercial geothermal in Oklahoma, 1 ton to 2,000 tons, and what COP actually means.