Changeouts & Stove Tax Credits

Tax Credits:

HPBA Tax credit website page: click here 

Existing Wood and Pellet Heater Investment Tax Credit (ITC)

August 2022: NEW Biomass Stove Tax Credit - Enacted!

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?

• Effective Dates: The new tax credit under Sec. 25(C) of the U.S. Internal Revenue Code (“IRC” or “tax code”) is effect on January 1, 2023 for qualifying purchases and installations completed on or after that date, through December 31, 2032.
• Credit Amount: Creates a new tax credit of 30 percent of the purchase and installation costs (with a $2,000 annual cap with no lifetime limit) for tax years 2023 through 2032.
• Qualifying Products: Qualifying products (any biomass-fueled heater) must have a thermal efficiency of at least 75 percent per the higher heating value (HHV) of the fuel
  • The EPA certified wood heater database may be referenced (not all products on the EPA list qualify. Look for products with efficiencies of at least 75 percent)
  • A manufacturer certification statement attesting that a product qualifies can also be relied upon

See our new FAQs about this new tax credit for additional information.

Existing 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?

• Effective Dates: The new tax credit under Sec. 25(D) of the U.S. Internal Revenue Code (“IRC” or “tax code”) will come into effect on January 1, 2021 for qualifying purchases and installations completed on or after that date, through December 31, 2023
• Credit Amount: Creates a new tax credit of 26 percent of the purchase and installation costs (with no cap or lifetime limit) for tax years 2021 and 2022; moves down to 22 percent of purchase and installation costs in 2023 (under Sec. 25D of the U.S. tax code)
• Qualifying Products: Require qualifying products (any biomass-fueled heater) be at least 75 percent efficient per the higher heating value (HHV) of the fuel
  • Further IRS guidance on qualifying products will likely be provided in 2021
  • In the meantime, the EPA certified wood heater database may be referenced

What happens to the 25(C) tax credit?

• Eliminates the tax credit for biomass stoves under IRC Sec. 25(C) starting in 2021 and enacts this provision in its place
• Any product purchased in 2020 that qualifies for the new Sec. 25(D) credit, but isn't installed until 2021, can be claimed under the Sec. 25(D) credit on a 2021 tax return. Products must be claimed on the tax return year in which the product installation is complete. 

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.

Download the consumer one-pager here

The Sec. 25(C) Tax Credit for Biomass Stoves (2020)

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

Changeouts by State:

Maine:

Efficiency Maine Low-Interest Loans Program

• Program Duration: Ongoing
• Eligibility: Residents of Maine
• Loan: Varying loan amounts for qualifying wood and pellet stoves, pellet boilers and furnaces

For more information, go to Efficiency Maine

ME - Efficiency Maine Residential Home Energy Savings Program

Eligibility: Residents of Maine

• Rebate: 1/3 the cost (up to $6,000) to purchase a qualifying pellet boiler or furnace

Website

Massachusetts:

CLOSED - Massachusetts Clean Energy Center (MassCEC) Changeout

Vermont:

1. Efficiency Vermont Rebate Program for Purchasing a Central Heating System or Woodstove

• Program Duration: Ongoing
• Eligibility: Residents of Vermont
• Rebate: Up to $6,000 cash back for a central heater and up to $750 discount for a qualifying woodstove

For more information on WOODSTOVES: Efficiency Vermont For information on central heaters: Efficiency Vermont

New York State:

New York State Pellet Stove Incentive Program 

• Program Duration: Ongoing
• Eligibility: Residents of New York state
• Rebate: $1,500 rebate; low-income residents $1,500 to $2,500

Website