Tax Credit FAQs

Q:What is a federal consumer tax credit?
A: Consumers claim the credit on their federal income tax form at the end of the year. This new credit reduces the amount of tax you owe. The new credit is a reduction of total income tax at the bottom of your return, up to $1500. This tax credit is a non-refundable tax credit available for individuals who pay taxes and who make energy-conscious purchases to improve the energy efficiency of their home.
Note: With regard to tax credits vs. tax deductions, in general, a tax credit is more valuable than a similar tax deduction. A tax credit reduces the tax you pay, dollar-for-dollar. Tax deductions - such as those for home mortgages and charitable giving - lower your taxable income.

Q: When does this tax credit go into effect and how long will it last?
A: The tax credit went into effect January 1, 2009 and is valid only for the purchase of a qualifying biomass stove during 2009 and 2010. The maximum tax credit for the two-year period is $1500. The sales receipt must indicate that the purchase was made between January 1, 2009 and December 31, 2010.

Q: Who determined the tax credit guidelines for the qualifying units?
A: The Department of the Treasury, and specifically, the IRS.

Q: Will other wood and solid-fuel appliances (like inserts, EPA-certified wood-burning fireplaces and hydronic heaters) qualify for the tax credit?
A: The IRS did not state that inserts are covered, or are not covered. However, based on EPA's  practice of treating inserts and freestanding biomass stoves in a similar fashion, manufacturers may choose to include inserts. At this time (June 2009) it is not clear whether EPA-certified wood-burning fireplaces or hydronic heaters will qualify.

Q: Do all pellet stoves qualify for the tax credit?
A: Any pellet stove that meets the 75% efficiency rating and has the qualifying documentation does qualify for the tax credit.

Q: Are the installation costs, both labor and venting (chimney), covered?
A: Installation is covered as long as it is a required for proper and safe operation of the stove, The IRS is silent on the possible need to replace a chimney when upgrading an existing biomass stove; however, the EPA has a section on its website titled, Installation Affects Efficiency, which retailers and consumers should consult when deciding if a chimney replacement is warranted when installing a biomass stove,

Q. Are biomass stoves installed in new homes, or vacation homes, covered by this tax credit?
A. No. The IRS is very clear that this credit applies only to existing principal residences, thus new homes and vacation homes would not qualify, nor would homes owned as rental units.

Q. If a consumer purchases other products, such as solar collectors or window upgrades, does this mean a biomass stove tax credit can't be taken?
A. The tax credit is an aggregate, meaning the 2-year $1500 total credit can be used for items other than biomass stoves, such as windows and doors, HVAC and non-solar water heater upgrades, and roof upgrades, all of which are in the same tax credit category as biomass stoves. The tax credit for all of these upgrades is capped at $1500 for the two year period. For example, if a taxpayer uses the entire $1500 for a product in 2009, then they cannot use it in 2010 for any other product in that same tax credit category.

Q: Are prior purchases covered?
A: Prior purchases made between January 1, 2009, and June 1, 2009 are covered if the manufacturer offers a certification statement for the product.

Q: Do stoves that are not newly tested for efficiency qualify under the tax credit?
A: If a manufacturer has documentation that a stove has already achieved the required efficiency rating and issues a certification statement for the product, no further testing is required.

Q: Why was 75% efficiency selected?
A: The 75% efficiency was designated by the U.S. Congress in 2005 as part of the Energy Policy Act and was used again for this tax credit.

Q: How is the 75% efficiency requirement determined?
A: The manufacturer of the stove must provide certification that the product tests for at least a 75% efficiency rating using the lower heating value, i.e., the heat value of a combustion process assuming that none of the water vapor resulting from the process is condensed out, so that its latent heat is not available.

Q: What must a manufacturer provide to a consumer to prove that a product is certified?
A: The manufacturer must certify that its product meets or exceeds the IRS efficiency requirement. To do so, the manufacturer of a stove that qualifies for the tax credit may certify to a taxpayer that the component is a "qualified energy property" by providing the taxpayer with a manufacturer's certification statement that satisfies the requirements of sections 6.04, 6.05 and 6.o6 of the IRS Guidance found at http://www.irs.gov/pub/irs-drop/n-09-53•pdf. The certification statement may be provided by including a written copy of the statement with the packaging of the component or property, in printable form on the manufacturer's website, or in any other manner that will permit the taxpayer to retain the certification statement for tax recordkeeping purposes.