Federal Biomass Wood Stove Tax Credit
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. As of January 2021, the tax credit offered is now 26% 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 an unlimited 26% tax credit based on the cost to purchase and install your unit.
This offer will also apply to purchases made in 2022. In 2023 the offer will drop down to 22 %. If you already made one of these purchases before December 2020, you may still claim a credit of some kind; please check with your tax professional about amending returns.
Qualifications are as follows:
- Your wood heater must burn biomass as a fuel, heating air or water, and be at least 75 percent efficient HHV(higher heating value).
- Must be purchased and installed between January 1, 2021 and December 31, 2023 in your primary or secondary home.
- Must have Receipts for your total cost of purchase, installation, labor, and materials (including venting).
Tax-Credit Friendly Wood and Wood Pellet Stoves
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%
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.