December, 2015: Wood Still Good, says the Fed
In December, 2015, the expired 2014 tax credit for energy efficient biomass-burning
appliances was extended to include stoves purchased in 2015 and 2016. The package provides a $300
tax credit on the purchase of a qualifying wood or
pellet-burning heater (previous versions offered a tax credit totalling 10% of
the purchase price, UP TO $300). The tax credit is subject to a $500 lifetime limit and applies retroactively to appliances purchased between January 1,
2015 and December 31, 2016.
- 2016 Biomass Tax Credit Extension FAQ's
Q: How does the new 2015-2016 extension of the Recovery Act affect the purchase of wood stoves?
A: If you purchase and install a new, qualifying biomass (wood or pellet) stove between January 1, 2015 and December 31, 2016, you can take a
$300 credit against your 2015 or 2016 taxes.
Q: So, what does it take for a stove to qualify?
A: The stove must be new, must burn biomass fuel, must achieve a thermal efficiency rating of 75% or greater, and must
have been purchased and put into
service by Decemer 31, 2016.
Q: Could I buy more than one stove and get a
tax credit for each of them on this program?
A: Yes, if all are installed in your principal residence, up to the
lifetime energy tax credit ceiling of $500.
Q: So, I could buy new stoves for the new house I'm building, my summer cabin and my rental house and get a
(up to $500) for the total?
A: Nope, the credit only applies to stoves installed in existing principle residences. Your new house, summer cabin and rental don't qualify.
Q: Does this program apply only to wood stoves?
A: The tax credit also applies to other biomass appliances, such as pellet and corn stoves, as long as they achieve at least 75% thermal
Q: Will this be some sort of deduction applied to my total wages, like a medical deduction?
A: This is much better: the credit comes straight off the bottom line on your return.
Q: Let's say I install a new wood or pellet stove in 2016 (Tax Credit $300) and I end up owing $300 taxes for that year.
How much do I pay?
A: Nothing. Your $300 Biomass Tax Credit will cancel out your $300 tax obligation.
Q: What if I have a $500 tax refund coming back?
A: You get your refund, plus the $300 Biomass Tax Credit on your new purchase. Your IRS refund check will total $800.
Q: What if I only paid $100 in taxes last year? Do I still get my $300 Tax Credit?
A: Nope, you get $100. The credit cannot exceed the amount of taxes you paid in.
Q: I am on social security and pay no taxes, can I get the credit?
A: Nada. The credit is only against taxes you paid in (or still owe) for the year you put the stove in service.
Q: I purchased a wood stove for my home in 2011, and received a tax credit for $300. We've moved, and are now considering a
wood stove for this house. Can I claim the $300 tax credit on my 2016 return?
A: Nyet. There is a lifetime limit of $500 on
energy tax credits. You've already taken $300, so you only have $200 still available.
Q: Do all wood and pellet stoves qualify?
A: Only new stoves that achieve 75% minimum efficiency rating qualify for the tax credit.
Q: I checked the EPA label on the stove we want, and the efficiency rating was only 63%. Are we out of luck?
A: You might be OK. For some obscure reason,
the EPA arbitrarily assigns an efficiency of 63% to all non-catalytic wood
stoves, and 72% to all catalytic wood stoves. The real number is a result of
actual efficiency testing, and can be viewed on the manufacturer's website.
Q: What if I buy a wood or pellet stove second-hand? Can I take the credit?
A: Negative. The law specifies that the credit can only be applied to the purchase and installation of new stoves.
Q: Are you sure? I found the original bill online at http://www.irs.gov/pub/irs-drop/n-09-53.pdf , and it doesn't say anything about new or used.
A: It helps to have a magnifying glass and a working knowledge of legalese, but it's there alright, in Part 3, Section 2 .05 (1):
"A taxpayer may claim a credit... only if each of the following requirements is satisfied:
(b) The original use of the item commences with the taxpayer."
If you buy a used stove, you're not the original user, and you can't claim the tax credit.
Q: What about the hearth, stovepipe, chimney parts & labor I'll need to complete the installation?
Do they qualify for the tax credit?
A: Since the 2015 revision allows the maximum
$300 credit for the stove itself, installation expenses are a moot point.
Q: How do I prove to the IRS that I've purchased a qualified stove? Do I send anything in with my tax return?
A: Yes, you must fill out Form 5695, which you can download at
https://www.irs.gov/pub/irs-pdf/f5695.pdf. Your credit goes on line 22a.
Save your receipt for the stove and keep it in a safe place along with the
Manufacturer's Certificate of Qualified Energy Property.
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