Tax Credit for Qualifying Biomass Stoves

Wood and Pellet Stove Tax Credit Extended Through Dec. 31, 2016

Additional Details

Q: What is the Biomass Stove Tax Credit?

Answer: This federal tax credit encourages people to make energy-conscious purchases that improve the energy efficiency of their home. It is a $300 dollar-for-dollar tax credit for purchasing a qualifying biomass-burning stove between January 1, 2015 and December 31, 2016. Biomass simply means the stove uses wood or pellet fuel.

Taxpayers may claim the credit on their federal income tax form. The credit is a reduction of total income tax at the bottom of your return of $300. This tax credit is a non-refundable tax credit available for individuals who pay taxes and who make energy-conscious purchases to improve the energy efficiency of their home.

Q: How can I claim this tax credit on my tax return?

Answer: Paper Filing: The credit can be claimed on IRS Form 5695. Forms for 2015 have not yet been posted, but on the 2014 form, the biomass tax credit could be claimed on line 22a (Residential energy property costs — Energy-efficient building property). More detailed instructions regarding completion of this section can be found on the last page of IRS Form 5695 at the bottom of the first column.

Electronic Filing: If you are using tax filing software such as H&R Block or TurboTax, the credit likely will be found under the “Credits” section of the Federal portion. For example, H&R Block users in 2014 could find the credit under the “Home Ownership” section under “Credits” as the first option, “Residential energy credit or credit carry forward (Form 5695).

Q: If I claimed this tax credit in past years, may I claim it again this year?

Answer: No, if you claimed the tax credit in previous years, you may not claim it again.

Q: If I purchased a qualifying stove in 2014 but it wasn’t installed until 2015, in which year would I claim the tax credit?

Answer: You would claim the tax credit in the year in which it was installed completely. In this example, you would claim it in 2015.

Q: When does this tax credit go into effect and how long will it last?

Answer: This tax credit is valid only for the purchase of a qualifying biomass stove made between January 1, 2015 and December 31, 2016.

Q: The nonbusiness energy property credit is capped at $500, but I can only claim up to $300 for a biomass stove. Why?

Answer: The nonbusiness energy property credit can be claimed for a number of different qualifying purchases, all of which each have a specified credit cap. The biomass stove credit has a credit limit of $300 while, for example, the maximum credit a taxpayer could claim for a furnace or boiler is $150. If a taxpayer purchased a qualifying biomass stove and a qualifying furnace in the same year when they could claim the tax credit, they would be able to claim the maximum credit amounts ($300 + $150) for both products (if applicable) and would be under the total cap limit of $500.

Q: Do I need a manufacturer certificate or receipt of sale to apply for this tax credit?

Answer: Yes, but only for your personal tax records. You should retain (1) the sales receipt and (2) the manufacturer’s certification. The sales receipt demonstrates that you purchased the qualifying stove during the effective time period of the credit. The retailer from whom you purchased the qualifying stove should also provide you with a manufacturer’s statement indicating that the product is qualified for the tax credit.

Q: Are biomass stoves installed in new or vacation homes covered by this tax credit?

Answer: No. The credit only applies to a purchase made for your existing principal residence. The exact IRS language state that this credit covers “a stove which uses the burning of biomass fuel to heat a dwelling unit located in the United States and used as a residence by the taxpayer.”

Q: What appliances qualify for the tax credit? What does the IRS consider to be “biomass fuel?”

Answer: Any wood- or pellet-burning stove that meets or exceeds the 75 percent efficiency rating qualifies for this credit.

Visit your local specialty retailer who can explain which products qualify for the tax credit.

Q: Why was 75 percent efficiency selected?

Answer: The 75 percent efficiency number was originally designated by the U.S. Congress in 2008 as part of the Emergency Economic Stabilization Act and was used again for this tax credit.

Q: Do other wood and solid-fuel appliances (like inserts, EPA-certified wood-burning fireplaces and hydronic heaters) qualify for the tax credit?

Answer: The U.S. Congress and the IRS have not specifically stated that inserts are covered or are not covered. However, based on EPA’s practice of treating inserts and freestanding biomass stoves in a similar fashion, manufacturers may choose to indicate that qualifying inserts are covered. This credit does not cover open wood-burning fireplaces, hydronic heaters, wood warm air furnaces, and anything else that is not a wood or pellet stove.

Q: If a consumer purchases other products, such as solar collectors or window upgrades, does this mean a biomass stove tax credit can’t be taken?

Answer: No, the tax credit is an aggregate, meaning the total nonbusiness energy property credit can be used for items other than biomass stoves, such as windows and doors, HVAC and non-solar water heater upgrades, and roof upgrades, all of which are in the same tax credit category as biomass stoves. The tax credit for all of these upgrades is capped at $500 for expenditures made after December 31, 2005.

Q: What must a manufacturer’s certification statement contain?

Answer: A manufacturer’s certification statement must contain the following information:

  • The name and address of the manufacturer.
  • Identification of the class of qualified energy property (Biomass-Burning Stove) in which the property is included.
  • The make, model number and any other appropriate identifiers of the stove.
  • A statement that the product is an eligible qualified energy property.
  • A manufacturer’s certification statement must contain a declaration, signed by a person currently authorized to bind the manufacturer in these matters, in the following form: “Under penalties of perjury, I declare that I have examined this certification statement, and to the best of my knowledge and belief, the facts are true, correct, and complete.”
  • These documents don’t need to be attached to your tax return, but you should keep them for your records.

Q: What should a retailer provide and the customer retain for tax purposes?

Answer: Retailers and consumers must keep exact records of any sale or purchase. Retailers should provide a consumer with the manufacturer’s certification statement for the specific product model purchased. A consumer may rely on a manufacturer’s certification statement that their products are qualified energy property. A taxpayer is not required to attach the certification statement to the return on which the credit is claimed. A consumer claiming a credit for the qualified nonbusiness energy property should retain the certification statement as part of the taxpayer’s records.

Manufacturers should make this certification document available to consumers on their website, in the product packaging, or in some other easily accessible manner.

Q: Are installation costs included in this tax credit?

Answer: Yes. Installation costs are included as long as professional installation is required for the proper and safe operation of the stove. The IRS is silent on the possible need to replace a chimney when upgrading an existing biomass stove; however, the EPA has a section on its website titled, Installation Affects Efficiency, which retailers and consumers should consult when deciding if a chimney replacement is warranted when installing a biomass stove.

Q: Does the stove need to be manufactured in the U.S. to qualify for the credit?

Answer: No, there is no “Buy America” component to this tax credit.

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