September 2022 UPDATE:
With the August 16, 2022, signing of the Inflation Reduction Act (IRA), high-efficiency biomass heating products once again qualify for a tax credit under Section 25(C) of the Internal Revenue Code (“IRC” or “tax code”). This new 30 percent tax credit – capped at $2,000 annually – is available for appliances installed between January 1, 2023, and December 31, 2032. The credit can be used on the purchase and installation costs of qualifying appliances. To be eligible for the tax credit, an appliance must have a thermal efficiency of at least 75 percent per the higher heating value (HHV) of the fuel. The IRA removes our products from Sec. 25(D) of the tax code where appliances were eligible for an uncapped 26 percent tax credit in 2021 and 2022.
Guidance and FAQs for both the upcoming 25(C) tax credit (effective for installations from January 1, 2023 and December 31, 2032) and the expiring 25(D) tax credit (effective for installations between January 1, 2021 and December 31, 2022) can be found further down the page. Feel free to contact Ryan Carroll with any questions that are not answered by our website.
Beginning in 2023, consumers buying highly efficient wood or pellet stoves or larger residential biomass heating systems may be eligible to claim a 30% tax credit – capped at $2,000 annually – based on the full cost (purchase and installation) of the unit. The credit runs through December 31, 2032. The 10-year term and 30 percent credit have been big components of HPBA’s advocacy push of the Biomass Thermal Utilization (BTU) Act over many years.
Please contact Ryan Carroll if you have any questions.
What is this new tax credit?
- Effective Dates: The new tax credit under Sec. 25(C) of the U.S. Internal Revenue Code (“IRC” or “tax code”) is effect on 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 percent of the purchase and installation costs (with a $2,000 annual cap with no lifetime limit) for tax years 2023 through 2032.
- Qualifying Products: Qualifying products (any biomass-fueled heater) must have a thermal efficiency of at least 75 percent per the higher heating value (HHV) of the fuel
- The EPA certified wood heater database may be referenced (not all products on the EPA list qualify. Look for products with efficiencies of at least 75 percent)
- A manufacturer certification statement attesting that a product qualifies can also be relied upon
What happens to the 25(D) tax credit?
- Eliminates the tax credit for biomass stoves under IRC Sec. 25(D) starting in 2023
- Any product purchased in 2022 that qualifies for the new Sec. 25(C) credit, but isn’t installed until 2023, can be claimed under the Sec. 25(C) credit on a 2023 tax return. Products must be claimed on the tax return year in which the product installation is complete.
See our new FAQs about this new tax credit for additional information.
HPBA will continue to update this page with additional information and new materials as we learn more. Please contact Ryan Carroll if you have any questions.