Federal Tax Credit for Pellet Heating Appliances & Installations
There’s nothing better than that cozy feeling of heating up your home with a wood pellet stove. If you’ve been looking into purchasing a wood or pellet heating appliance, there’s never been a better time. To become more energy-efficient, a spending pandemic relief package called The Wood and Pellet Heater Investment Tax Credit was signed into law in December 2020 that allows a 26% tax credit on wood and pellet heaters. Under Section 25D of the Internal Revenue Code, the renewable energy investment tax credit covers 26% of both the purchase and installation cost of the appliance through 2021 and 2022 and decreases to 22% in 2023.
- What Heating Appliances Apply?
- What Happened to The 25C Tax Credit?
- What Do I Need to Claim The Heating Appliance Income Tax Credit?
- How Do I Claim The Biomass Stove Tax Credit?
- What If I Purchase a Heating Appliance for a Secondary Home?
- Heating Wood Pellets Available From Energex
What Heating Appliances Qualify?
The 2021 pellet stove tax credit applies to qualifying biomass-fueled heaters at least 75% efficient or greater based on the higher heating value (HHV). To get the pellet heater tax break, you must purchase and install the appliance between January 1, 2021 and December 31, 2023. Even though the appliance needs to be purchased and installed in those tax years, any qualifying product purchased in 2020 but not installed until 2021 can still be claimed on a 2021 tax return. The products have to be claimed on the tax return year in which the heating appliance installation is completed. The EPA-certified wood heater database has everything you need to know about the qualifying products.
What Happened to the 25C Tax Credit?
At the end of 2019, a $300 tax credit was signed into law for biomass stoves at least 75% efficient and purchased in 2018 through 2020. Section 25D eliminates the IRC Section 25C making it obsolete and enacting this legislation in its place.
What Do I Need to Claim the Heating Appliance Income Tax Credit?
To receive the pellet heating appliance income tax credit, you’ll need some paperwork to keep for your personal tax records. The first few documents you’ll need are the sales receipt for the purchase of your heating appliance, as well as any installation paperwork. These two documents help you demonstrate that you purchased and completed the install of the heating appliance during the effective tax credit period.
The other document is a manufacturer’s certificate. The manufacturer’s certificate of the appliance states the product meets the 75% efficiency requirement. You don’t need the certificate to claim the tax credit, but it is ideal to have and will help if you can get your hands on the document. Manufacturers of appliances must provide a manufacturer’s certificate for their products – some manufacturers have easy accessibility to certification documents on their websites. Remember to confirm that you have the certificate upon purchasing your wood or pellet stove.
The certificate should include information like:
- The name and address of the manufacturer
- The class of qualified energy property
- The make and model number
- A statement that the product is eligible
- A declaration that an authorized person signs to bind the manufacturer.
If you don’t have the certification statement, there are other ways to prove the information you need for the high-efficiency pellet stove tax credit. Other options include taking a screenshot or printout of the product manual page that states the product is at least 75% efficient based on the HHV.
How Do I Claim the Biomass Stove Tax Credit?
You must file it on your federal tax return to claim the pellet heating appliance income tax credit. You’ll file for the credit the year you have the appliances installed. So if you purchase your pellet stove in 2021 and it’s installed in the same year, then you can claim it on your 2021 tax return. If you bought your heating appliance in 2020 and it wasn’t installed until 2021, then you can still claim the tax credit on your 2021 tax return as well.
If you’re filing your taxes with a paper form, then the tax credit can be claimed by filing the IRS form 5695 under Residential Energy Efficient Property Credit with your federal return. If you are filing your taxes using tax filing software, the credit is found under the “credits” section of the Federal portion under homeownership and residential energy credit. If you purchased and installed a qualifying product in a previous tax year, you can file an amended return on the IRS form 1040-X.
What If I Purchase a Heating Appliance For a Secondary Home?
The 2021 pellet stove tax credit can even be claimed for qualified heaters installed in secondary or vacation homes. Claiming the tax credit for a secondary or vacation home can only be done if the owner of the property uses it as a residence and not as an investment rental property. If you have another home that you use as a residence and want to install a qualified pellet stove during the time period of Sec. 25D, then you can claim the tax break for that stove.
The biomass stove tax credit for 2021 can also be claimed for heating appliances that qualify and are installed in newly constructed homes. In order to determine the cost of the newly constructed qualifying property under Sec. 25D, the taxpayer can ask the home builder to make an appropriation. Labor costs of installing the heating appliance fall under the installation costs that are covered by the tax break as well, which includes anything that needs to be done to connect the heating appliance to the home.
If your home was constructed in a previous year with the qualified heating appliance, but you didn’t purchase and start living in the home until the next year, then it still qualifies for the tax credit as long as the taxpayer starts using the house as a residence before the tax credit expires.
Heating Wood Pellets Available From Energex
If you’re looking to improve the energy efficiency of your home by purchasing a wood or pellet heating appliance, now is the best time to do it. You’ll not only save money with the tax credit by purchasing a wood pellet stove, but you’ll also be saving money in the long run since wood and pellet burning stoves are more efficient and cost-effective than other heating options.
Energex is the best option to meet your wood pellet needs. Our wood pellets meet the highest quality standards and are Pellet Fuels Institute (PFI) certified, making them renewable and sustainable. Our premium word products are also affordable and available to order in bulk to meet your heating and efficiency needs. If you’re interested in learning more about what we have to offer, then don’t hesitate and contact a customer representative today.
