A Guide to the Biomass Federal Tax Credit for Stoves

Did you know you can claim a $300 Biomass Federal Tax Credit amount if you purchase a qualifying wood burning stove or pellet stove on your 2015 and 2016 tax return? This program has been extended to December 31, 2020!

This is a great incentive for those shopping around for a wood stove, all you need to know is precise which stoves qualify.

Essentially, wood or pellet stoves that have a thermal efficiency rating of at least 75% qualify for the federal tax credits. But check out the FAQ’s below if you want to know about the specific criteria set out by the US government.

Biomass Tax Credit Frequently Asked Questions

What is Biomass in this Context?

Specifically for this case, biomass focuses on the Wood and Pellet stoves, but it’s not actually restricted to just these types of stove. A biomass fuel is any plant or organic matter-derived fuel that is made available for sustainable and renewable energy, and such examples are any agricultural crops, trees, woods, pellets, grass, and fibers.

What is a Tax Credit?

A tax credit is a government-sanctioned decrease in your tax payment. It allows you to pay less on your annual tax for the credited tax, which is deducted from the total amount of the normal tax you would have to pay.

Which Stoves Meet the Requirements?

When looking for a new wood stove you need to make sure it meets the 2020 EPA clean air standards and uses biomass fuel, which in simple terms means that it utilizes plant-derived fuel, most commonly including regular wood, wood waste or pellets.

The reason that this initiative has been supported by the federal government is to encourage more people to opt for energy efficient stoves that use less fuel and release fewer greenhouse gases.

Don’t be too concerned about having to go on a long hunt for the required stove as there’s a lot of choices out there and due to this tax incentive, as a lot of companies are utilizing it as an easy way to draw people in to buy their products, check out this page for pellet stoves that fit the bill, or this page for wood burners that meet the requirements too.

What is a Biomass Tax Credit?

The Biomass Federal Tax Credit is a new United States Legislative act, which allows consumers of suitable stoves to claim the tax for their purchases on such items which fall under the biomass federal tax credit legislation.

The amount of this credit is $300 and it may be claimed by filing on your Federal Income Tax form for the year in which the product was purchased and installed.

Exactly which products qualify for the Biomass Tax Credit?

As part of the Energy Policy Act passed in 2005, a 75% energy efficiency rating is the requirement for each heating appliance.

This includes qualifying Wood and Pellet stoves, but it is not restricted to these but in fact, any biomass appliance that meets the required percentage of thermal rating efficiency. See here for a variety of qualifying stoves.

Which types of fuel are considered biomass fuel qualify for this Federal Tax Credit?

As stated by the IRS, “any plant derived fuel available on a renewable and recurring basis.”

However, it is recommended and advised that you always consult the manufacturers of the product and the accompanying guide to ensure that the product is qualified for the Biomass Tax Credit. However, don’t be too concerned as most manufacturers clearly advertise the tax advantage as part of their sales pitch.

Is there any existing master list for eligible biomass stoves products?

There is no existing master list of this kind as of today, it’s always advisable to ask and request information from the retailers and manufacturers of the purchased products to ensure the eligibility of the product to the Biomass Credit Tax.

Why was 75% efficiency the selected as the Threshold? 

75% efficiency was established as a basis for energy act in Congress in the year of 2008 as a part of the Emergency Economic Stabilization Act, thus, used as a basis for this tax credit.

When will the Biomass Federal Tax Credit be effective?

The passing of legislation took place and went into its effect on December 18, 2015; thus the scope and its validity stretch from all the purchase made from January 1st, 2015 to December 31st, 2016. In addition, when filing your taxes for these periods, the receipt must be presented as well to show the date of purchase of your stove.

This program has been extended until December 31, 2020, so no matter time than now to make your purchase!

If qualified products are purchased in 2014 but installed in 2015, is it still covered by the Credit Tax?

If the qualified products are installed under the year of effectiveness which falls in the years 2015 to 2016, of the Biomass Credit Tax, then it is covered, thus, the non-refundable tax will be applied to the year of installation. 

Aside from the Sales Receipt, is the Manufacturer’s Certificates required?

Apparently, yes but for personal tax records only. Once Sales Receipts are presented indicating the date of purchase, there’s no need to present the Manufacturer’s Certificate anymore. These certificates only serve as proof that the manufacturers certify the qualifications of the products.

Are products installed in new homes and residential properties also covered by this Biomass Tax Credit?

Unfortunately, the only ones that are covered by the Biomass Credit Tax are the existing Principal Homes alone where the qualified products are installed. New residential areas and newly purchased homes do not qualify in this case.

How do you file a claim for the Biomass Credit Tax?

One needs to have and file a fully furnished Individual Income Tax Return Form (1040) and a Residential Credits Form (5695). Both are needed to claim the said benefit.

Where do you file these forms?

These forms may be filed through Tax Software platforms that may be accessed online. And through United States mail which would take time for this and involves the manual and traditional filing of forms.

Is there a need to consult a Tax Advisor?

For a better understanding and comprehension of the aforementioned Biomass Federal Credit Tax, it is very much recommended and advisable to consult a respective Tax Advisor so the application and processes will be much more efficient and straightforward for you.

Where to get additional information?

If you still have questions regarding the wood stove tax credit, visit the official HPBA website. 

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