Federal Biomass Wood Stove Tax Credit

Megan Edwards

Written by: Megan Edwards

Published on:

Planning can save you money.

For more than a decade, Section 25(C) of the tax code provided a $300 tax credit for purchasers of fuel-efficient heating systems.

In December of 2020, a spending bill and a pandemic relief package was signed into law that included a new tax credit for efficient heating systems that is substantially more lucrative for homeowners. Now the tax credit offered is 30% of the total cost of purchasing and installing your fuel-efficient heating unit!

Additionally, fuel-efficient wood and wood pellet-based heating systems were added to qualify for this renewable energy investment tax credit, just like the wind, solar, fuel cell, and geothermal systems that have qualified for similar incentives in the past.

What does this mean for you as a homeowner?

Well, it means that if you are considering buying a highly efficient wood or pellet stove or biomass heating system this year, you should be able to claim a 30% tax credit all the way up to $2,000 based on the cost to purchase and install your unit. The $2,000 is an annual cap with no lifetime limit for tax years 2023 through 2032.

Qualifications are as follows:

  1. Your wood heater must burn biomass as a fuel, heating air or water, and be at least 75 percent efficient HHV(higher heating value).
  2. Must be purchased and installed between January 1, 2023 and December 31, 2023 in your primary residence.
  3. Must have Receipts for your total cost of purchase, installation, labor, and materials (including venting).

If you purchased late in the year and installed the following year. The claiming percentage will be based on the Tax year that you file your claim for. The Tax year that you file your claim should be based on the year that you installed your new equipment, not the year in which it was purchased if it was different.

You may use this incentive to lower your federal tax liability to zero but not below zero, meaning you will not get a check or cashback from this tax credit in the event you already have zero tax liability.

How To File

Once your install is complete, be sure to keep your receipt from purchase and install for your tax records. Also, keep on file your manufacturer certificate stating the heating apparatus is 75% or higher efficiency rating (HHV) and qualifies for the credit. Claim the credit on your federal tax return. You may claim this using tax software that includes the credit as an option or using form 5695 for the “Residential Energy Efficient Property Credit.”

Edwards Hearth & Home offers a variety of fuel efficient wood and wood pellet stoves. View our tax credit approved fuel efficient wood burning heaters here: https://edwardshearth.com/product-category/high-efficiency/ 

Remember to consult your tax professional to make sure you take the necessary steps to take advantage of the tax credit. For further information this matter see the resources below.

Learn more here: Tax Credit | Biomass | Stove | Initiatives | HPBA

PDF Page 2,449. https://docs.house.gov/billsthisweek/20201221/BILLS-116HR133SA-RCP-116-68.pdf

Tax Credit Language: https://www.law.cornell.edu/uscode/text/26/25D

Form 5695 Information: https://www.irs.gov/forms-pubs/about-form-5695 

BTU: Up to 60,000 – Efficiency: 79%

Hearthstone Shelburne

Stoves like this Hearthstone Shelburne are a great example of a high-efficiency wood stove with a rating of 79% making it Biomass tax-credit friendly. The Shelburne is constructed of high-quality cast iron parts from our Spanish foundry and finished with beautiful porcelain enamel. Lined with soapstone blocks and using our TruHybrid™ technology, the Manchester offers long-lasting and efficient heat.

View The Shelburne

Browse Our High-Efficiency Stoves


About THE AUTHOR

Megan Edwards is the Granddaughter of Wesley Edwards, founder of Edward's paving Contractor.