Changeouts & Stove Tax Credits

Tax Credits:

HPBA Tax credit website page: click here 

NEW Wood and Pellet Heater Investment Tax Credit (ITC)

JANUARY 11, 2021 UPDATE: Out with the old and in with the new! A spending legislation and pandemic relief package was signed into law at the very end of December and included a long sought-after tax credit for wood and pellet heaters. These systems, whether they are stoves purchased to heat space or larger, whole home heating systems, will now qualify for a renewable energy investment tax credit (Section 25(D) of the Internal Revenue Code). Up until now, only solar, small wind, fuel cell, and geothermal systems qualified for this credit. 

Beginning in 2021, consumers buying highly efficient wood or pellet stoves or larger residential biomass heating systems will be able to claim a 26% tax credit that is uncapped and based on the full cost (purchase and installation) of the unit. The credit will remain at 26% through this year and next, and then step down to 22 percent in 2023. This provision is part of the BTU Act, which has been actively supported by HPBA for the last several years and has been part of our Advocacy Day requests to Members of Congress. 

NOTE: The language that made it into the final spending package eliminates the Sec. 25(C) credit for biomass stoves. The Sec. 25(C) tax credit may still be claimed on your 2020 tax return for qualifying purchases and installations completed before December 31, 2020.

What is this new 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:

Cumberland County, ME American Lung Association Wood Stove Change-out Program - Click for Application / Click for Fact Sheet

Efficiency Maine Low-Interest Loans Program - Varying loan amounts for qualifying wood and pellet stoves, pellet boilers and furnaces. Click here for more information.

Efficiency Maine Residential Home Energy Savings Program - Residents of Maine are eligible. Rebate is 1/3 the cost (up to $6,000) to purchase a qualifying pellet boiler or furnace. More information here. 

Massachusetts:

CLOSED, but may be renewed in 2021 - Massachusetts Clean Energy Center (MassCEC) Changeout

• Eligibility: Any Massachusetts resident or business that currently uses a non-certified woodstove or fireplace insert.
• Rebate: Standard Rebate between $1,000 to $1,500; Low-Income Rebate between $2,500 to $3,000. Click here for more information.

Vermont:

Clean Energy Development Fund (CEDF) Small Scale Renewable Energy Incentive Program for Advanced Wood Pellet Heating Systems

• Eligibility: Residents of Vermont
• Rebate: $2,500 per unit; $5,000 total per customer for purchasing a qualifying wood pellet heating system. Click here for more information.

New York State:

New York State Pellet Stove Incentive Program

• Eligibility: Residents of New York state
• Rebate: $1,500 rebate; low-income residents $1,500 to $2,500
• Website: http://www.nyserda.ny.gov/All-Programs/Programs/Renewable-Heat-NY/Residential-Wood-Pellet-Stove