There’s good news if you’re planning to buy a wood or pellet stove this year. If you purchase and install it before December 31, 2016, you may be eligible to claim a tax credit on your 2016 tax return.
1.  What Is The Biomass Stove Tax Credit?
The Biomass Stove Tax Credit is a tax incentive designed to encourage the purchase of energy-efficient heating appliances such as wood and pellet stoves. If you purchase and install a qualifying product before the specified deadline, you can get a $300 direct reduction in the amount of federal taxes you have to pay for 2016. Qualifying heating appliances must burn biomass fuel and either provide heat for your home or heat water for use in it. They must also have a minimum heating efficiency of 75 percent.
What is biomass fuel?
The IRS defines biomass fuel as any type of renewable fuel that comes from plants. This is a broad category, but it includes crops, wood, wood byproducts, and grasses. As a result, both wood and pellet stoves qualify as burning biomass fuel, because one burns firewood and the other burns wood pellets.
What is heating efficiency?
Heating efficiency is determined by the amount of fuel that gets burned versus the amount that gets wasted and escapes through the chimney as smoke. A more efficient stove is able to burn a larger portion of the fuel, producing more heat for your home Check your manufacturer information for the heating efficiency of your stove.
2.  Why Is This Tax Credit Being Offered?
Wood and pellet stoves can be a very green heating method when they’re efficient enough. The Biomass Stove Tax Credit encourages homeowners to purchase stoves that meet that bar. Older stoves tend to be less efficient, and can produce large amounts of particulate matter that gets absorbed by the environment. This can lead to both environmental and health problems in communities that rely on stoves for heating.
3.  What Stoves Qualify?
Any newly manufactured wood or pellet stove that possesses a heating efficiency rating of 75 percent qualifies for the Biomass Stove Tax Credit. The credit does not apply to used stoves.
Why would I want to buy a new stove?
Today’s stoves are much more efficient than past models. In fact, as of December 31, 2015, all new stoves are required by the EPA to produce fewer than 4 1/2 grams of emissions per hour. To do this, EPA-certified stoves feature a secondary combustion chamber that burns the smoke produced by the wood. This means longer burn times and more heat for your home, while using the same amount of fuel as older stoves. You’ll ultimately need less firewood or fewer pellets to get through the winter—in the long run, that’s a lot of money saved.
It should be noted that despite their higher efficiency, not all EPA-rated stoves automatically reach the 75 percent threshold required by the Biomass Stove Tax Credit. If you want to make sure your stove purchase will qualify, call our representatives at 800-919-1904. They can point you to the right product.
What if I have a non-qualifying stove?
The Environmental Protection Agency (EPA) and the Hearth, Patio, & Barbecue Association (HPBA) have partnered in the past with local communities to create wood stove change-out programs. These programs offer various financial incentives for homeowners to swap out their old stoves with new and more efficient models. If there is a current change-out program in your area, it may help to cover the cost of a new stove that qualifies for the Biomass Stove Tax Credit. Check with your local government to find out. You can also view the HPBA’s map of current change-out programs here.
4.  How Do You Apply For It?
To apply for the Biomass Stove Tax Credit, include IRS Form 5695 with your 2016 federal tax return. Your stove manufacturer will provide you with an efficiency certification. You should keep this, along with your sales receipt, for your own records—you don’t have to submit them to the IRS.
5.  When Is The Deadline?
The deadline for purchasing and installing a qualifying wood or pellet stove is December 31, 2016. Once you have a qualifying stove, you must then apply for the Biomass Stove Tax Credit with your 2016 tax return.
6.  Are There Any Other Restrictions?
The Biomass Stove Tax Credit can only be claimed with qualifying stoves purchased for existing homes. Stoves purchased for new construction or rentals do not qualify.