How To Qualify for the USA Energy Tax Credit

With the start of the New Year, industry has a new tax credit to enjoy for the next 10 years. Put in place through last year’s Inflation Reduction Act (IRA), qualifying wood-burning appliances (biomass stoves and biomass boilers) are now eligible for a 30% tax credit (including purchase, installation, and labor costs). The IRA moved our credit from Section 25D of the tax code to Section 25C, also known as the Energy Efficient Home Improvement Credit.

Key features dealers and consumers need to know include:

• Qualifying appliances must have a thermal efficiency rating of at least 75% (measured by the higher heating value of the fuel).
• Capped at $2,000 per year – there is no carryover provision from year to year, but the $2,000 limit does reset each year.
• Non-refundable tax credit – this means you can have your tax liability reduced to $0, but the credit will not generate or increase a tax refund.
• Appliances are paired with heat pumps – if purchasing a qualifying heat pump or water pump and a qualifying wood heater in the same year, the maximum credit between the two purchases is $2,000 aggregate.
• May be used for primary or secondary property that you actually live in – may not be used for a rental property (although a renter could claim the credit for a property in which they live).
• Claimable in the year the property is installed – when purchasing in one year and installing in another, the credit falls in the tax year the installation is completed.

HPBA has an FAQ and one-pager for the 25C tax credit. The IRS has also recently updated its tax credit FAQs. For questions on the tax credit, please contact Ryan Carroll or John Crouch.

If Purchased in 2022

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”) is in effect from January 1, 2021 for qualifying purchases and installations completed on or after that date, through December 31, 2022.
• Credit Amount: 26% of the purchase and installation costs (including venting, blower, ash pan, trim kits, hearth pad, and labor), for 2021 and 2022 (with no cap or lifetime limit) under Sec. 25D of the U.S. tax code. Tax credit can add up to $2,000 or more!
• Qualifying Products: Any biomass-fueled heater (wood stove, wood insert, pellet stove or pellet insert) and is 75 percent efficient per the higher heating value (HHV) of the fuel.
• Any product ordered in 2021 that qualifies for the new Sec. 25(D) credit, but isn’t installed and paid for until 2022, can be claimed under the Sec. 25(D) credit on a 2022 tax return.
• The credit must be claimed on the tax return year in which the purchase of the product is complete.

If Purchased in 2023-2032 What is this tax credit?

• Effective Dates: The new tax credit under Sec. 25(C) of the U.S. Internal Revenue Code (“IRC” or “tax code”) is in effect from 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% (capped at $2000.00) of the purchase and installation costs (including venting, blower, ash pan, trim kits, hearth pad, and labor) for 2023 through 2032 (with no lifetime limit) under Sec. 25C of the U.S. tax code. Tax credit can add up to $2,000!
• Qualifying Products: Any biomass-fueled heater (wood stove, wood insert, pellet stove or pellet insert) and is 75 percent efficient per the higher heating value (HHV) of the fuel.
• The credit must be claimed on the tax return year in which the purchase of the product is complete.

The credit must be claimed on the tax return year in which the purchase of the product is complete.

What models currently qualify?

Please contact us for current models that qualify.

How to Claim

• You will claim your credit when you file your federal income tax return
• Online/Software: Enter it into the Home Ownership & Residential Energy Credit section
• By Mail: Include the Lopi Tax Credit Certificate and Residential Energy Credit Form 5695.

We will continue to update this page with additional information and new materials as we learn more.