Medium - 1500 to 2000 sq ft

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.

Q:

What is the Biomass Appliance Tax Credit?

A:

The Biomass Appliance Tax Credit was reinstated with the American Taxpayer Relief Act of 2012 as part of the “fiscal cliff” legislation made law by President Obama on January 2, 2013. This tax credit offers a dollar for dollar credit up to $300, with a lifetime cap of $500. This tax credit can only be applied to biomass fueled stoves or inserts with a 75% efficiency rating that have been installed in your primary residence during 2012 or through the 2013 calendar year.

Biomass fuels won’t release “new carbon” into the atmosphere, thus helping to decrease your carbon footprint on the planet. These fuels include sources of renewable and sustainable energy such as wood, pellets, corn, switch grass, cherry pits and sawdust.

Q:

How do tax deductions and tax credits differ?

A:

A deduction is an amount of money that can be subtracted from your overall taxable earnings. Conversely, a credit refers to the dollar for dollar amount applied after all your deductions are made and comes straight off the bottom of your tax return.

Q:

How do non-refundable tax credits and refundable tax credits differ?

A:

A non-refundable tax credit is applied to the amount of tax owed by the taxpayer after he or she has made all the deductions from taxable income. Refundable tax credits don’t have a limit as to how much money at taxpayer can receive. The Biomass Stove Tax Credit is a non-refundable credit. Consult a tax professional with any questions.

Q:

When can I claim this tax credit and how long will it last?

A:

The current tax credit can only be applied to stoves and inserts bought in the 2012 and 2013 calendar years. The maximum amount that you are eligible to receive on a single qualifying biomass-burning stove or insert is $300. However, claiming earlier credits may make you ineligible. If you’ve purchased more than one of these products between January 1, 2007 and December 31, 2013, your total credits between those years must fall within a $500 lifetime cap.

Q:

How can I determine the value of my tax credit?

A:

A dollar for dollar tax credit of up to $300 is applied to qualifying biomass-burning appliances.

Q:

Which biomass-burning appliances qualify for this tax credit?

A:

Any biomass-burning stove or insert that meets a 75% efficiency rating qualifies for this tax credit. Biomass fuels include wood, pellets, corn, switch grass, and other renewable resources.

Q:

Will biomass stoves and inserts installed outside of my primary place of residence be covered by this tax credit?

A:

No. You are only able to claim this credit on biomass appliances that have been installed in your existing primary residence. This excludes vacation homes, rental properties, and unfinished new homes.

Q:

Can you explain what “renewable biomass” exactly means?

A:

Though the most common sources of “renewable biomass” include wood and pellets, this tax credit defines “renewable biomass” as any of the following:

(A) Materials, pre-commercial thinnings, or removed invasive species from National Forest System land and public lands, including those that are byproducts of preventive treatments (such as trees, wood, brush, thinnings, chips, and slash), that are removed as part of a federally recognized timber sale, or that are removed to reduce hazardous fuels, to reduce or contain disease or insect infestation, or to restore ecosystem health, and that are harvested in environmentally sustainable quantities, as determined by the appropriate federal land manager; and harvested in accordance with federal and state law, and applicable land management plans.

(B) Any organic matter that is available on a renewable or recurring basis from non-federal land or land belonging to an Indian or Indian Tribe that is held in trust by the United States, including renewable plant material like feed grains; other agricultural commodities; other plants and trees; and algae; and waste material, including crop residue; other vegetative waste material (including wood waste and wood residues); animal waste and byproducts (including fats, oils, greases, and manure); construction waste; and food waste and yard waste.

(C) Residues and byproducts from wood, pulp, or paper products facilities.

Q:

What’s the definition of a “Wood Burning Furnace”?

A:

Simply put, a wood burning furnace is a kind of furnace that consumes wood as its central source of fuel. There are three main kinds of wood burning furnaces –outdoor wood furnaces, multi-fuel furnaces and central wood furnaces. Outdoor furnaces are usually kept a significant distance from the house and use a hot-water system to distribute heat into the house through insulated underground piping. Multi-fuel furnaces are utilized inside or outside of the home and can burn several types of fuels, including wood, coal, oil or gas. With those types of furnaces, wood is usually employed as the primary fuel source with the option to burn other kinds of fuel. Central wood furnaces are installed inside the house and use either a forced-air or hot-water system for the distribution of heat.

Q:

Will additional products fueled by biomass be eligible for this tax credit?

A:

It is currently only offered for biomass-fueled stoves and inserts. As of February 2013, it’s ambiguous whether EPA-certified hydronic heaters and wood burning fireplaces will be eligible for this tax credit.

Q:

Will the purchase of products like window upgrades or solar collectors prohibit this tax credit from being taken?

A:

Items such as windows and doors, HVAC, non-solar water heater upgrades, and roof upgrades all exist in the same tax category as biomass stoves. For that reason, the tax credit is capped at a total of $500 from December 31, 2005 until the end of the 2013 calendar year.

Q:

Is there a way that I can guarantee a collection of my tax credit?

A:

It’s worthwhile to be as detailed in your record keeping as possible. 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.

Q:

Does this tax credit cover my installation costs?

A:

Installation costs are covered by this tax credit as long as the manufacturer states that professional installation is required to make the stove run safely. For more information, visit the Installation Affects Efficiency section (http://www.epa.gov/burnwise/energyefficiency.html) on the EPA’s website.

Q:

Do only US made stoves qualify for the credit?

A:

No, there is no Made in the USA stipulation for this tax credit.

Q:

How can I get more information about this tax credit?

A:

You’ll find additional information by clicking here.