A biomass stove tax credit, authorized through 2032, is included in the Inflation Reduction Act (IRA). Guidance and FAQs for both the upcoming 25(C) tax credit (effective for installations from January 1, 2023 and December 31, 2032) and the expiring 25(D) tax credit (effective for installations between January 1, 2021 and December 31, 2022) can be found here. Feel free to contact Ryan Carroll with any questions that are not answered on the website.
What is this new tax credit?
The IRS has updated its draft forms and instructions for the Residential Energy Credits on form 5695 for the 2021 tax season. Eligible taxpayers will be able to claim the new Section 25(D) tax credit for qualifying biomass stoves on line 5 of tax form 5695. Unlike on previous iterations of this tax form, biomass is specifically mentioned on the form and on its own line. The credit may be claimed in the year in which a qualifying product is installed. So, if a product is purchased in 2021 but not installed until sometime in 2022, the taxpayer would claim the credit (if the product is eligible and the person’s tax situation allows for it) on their 2022 tax return. HPBA has updated its consumer one-pager and website content to reflect these changes.
We understand that there may be a misunderstanding about how the new wood and pellet heater tax credit of 26% applies to federal tax returns. Some taxpayers may see an increase to their tax refund amount. Others with low tax liabilities might not be able to claim some (or any) of the tax credit if their federal tax obligation is low or already at zero. If customers ask you questions about how the tax credit applies to their tax return, ALWAYS refer them to a tax professional. Everyone’s tax situation is different and what is true for one person might not hold for another. For additional discussion on tax credits in general and how they work, see this article from eFile.
Feel free to contact Rachel Feinstein with any questions that are not answered here.
What is this tax credit?
What happens to the 25(C) tax credit?
See our new FAQs about this new tax credit for additional information.
NEHPBA will continue to update this page with additional information and new materials as we learn more. Please contact Rachel Feinstein if you have any questions.
The Sec. 25(C) biomass stove tax credit expired after December 31, 2020. The credit must be claimed in the year in which product installation was completed.
With this credit having expired, 2020 is the last year the biomass stove tax credit of $300 can be claimed on a tax return. Download the consumer one-pager here
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