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Q & A's

Biomass Appliance Tax Credit Reestablished for 2012-2013

After original legislation lapsed on December 31, 2011, a biomass tax credit extension was added to the American Taxpayer Relief Act of 2012 as part of the “fiscal cliff” legislation signed into law by President Obama on January 2, 2013. What does this mean for you? If you choose to install a biomass appliance with a 75% efficiency rating in your primary residence during the 2012 and 2013 calendar years, you’ll be eligible for a consumer dollar for dollar tax credit of up to $300. A $500 “lifetime limit” applies, though the credit available is dependent upon your purchase and installation of other products that are approved for the 25C tax credit.

For the purpose of this tax credit, biomass is defined as fuel powered from renewable and sustainable sources of energy. These include, but aren't limited to, wood, pellets, corn, and switch grass. Products that burn carbon neutral waste products (like cherry pits and sawdust) also count toward this tax credit.

An EPA approved stove or insert will lower your energy bills at home and qualify you for savings on your Federal income taxes this year. Best of all, the biomass tax credit is applied after all your deductions are made and comes straight off the bottom line of your Federal tax return. For the purpose of accuracy, keep exact records of your purchase – you must provide the manufacturer’s certification and a sales receipt indicating a covered date of purchase.

Please consult a tax professional with any questions you may have regarding details on the relevancy of this tax credit.

Important Things to Remember:

  • In order to qualify for this tax credit, you must purchase a new stove or insert with a 75% efficiency rating during the 2012 and 2013 calendar years. It’s also required to be installed in your place of primary residence. Vacation homes, rental properties, and new homes do not apply.
  • Stoves and inserts must use the burning of biomass fuel to qualify – this may mean wood, pellets, corn, switch grass and other renewable resources. Burning carbon neutral waste products like cherry pits and sawdust also qualifies you for this tax credit.
  • The Biomass Appliance Tax Credit offers a dollar for dollar credit up to $300. There is a lifetime cap of $500 in place for the amount of credit you are able to claim.
  • In order to receive this credit, you’ll need to file IRS Form 5695 with your taxes. Make sure you’ve kept exact records of your purchase, including the manufacturer’s certification and a sales receipt of the product within the covered dates.
  • The installation costs of your product may also be compensated under this credit, as long as it’s a requirement for the safety standard of your stove or insert. A ceiling credit of $300 still applies for the combined cost of purchase and installation.