New Tax Credit Available for Wood and Pellet Heaters

February 23, 2021 8:09 pm Published by Leave your thoughts

If you typically itemize your taxes each year and you have a pellet stove in Wausau, WI, you might qualify for a new wood and pellet stove tax credit that will apply beginning in the 2021 tax year.

At the very end of December, Congress signed a spending and pandemic relief package into law. Nestled away among the extensive language of this bill was a tax credit for wood and pellet stoves, something that has long been sought after by people who use and manufacture these products. These systems, both for space heating and whole-home heating, now qualify for renewable energy investment tax credits under Section 25(D) of the Internal Revenue Code, whereas previously only geothermal, fuel cell, solar and small wind systems would qualify.

Here’s an overview of what you should know.

About the tax credit

Starting in 2021, anyone who purchases efficient wood or pellet stoves or other types of large biomass heating systems will be allowed to claim a 26 percent tax credit. This credit is uncapped, and the amount is based on the full cost (both purchase and installation) of the unit. That credit remains steady at 26 percent through 2022, and then goes down to 22 percent in 2023. This credit applies to any purchases made between January 1, 2021 and December 31, 2023, so if you have been considering upgrading your system or adding one, now is a great time to do so.

For a product to qualify for this tax credit, it must have a thermal efficiency of at least 75 percent efficient per the higher heating value of the fuel it uses. That means it will be considered “highly efficient.”

However, you should keep an eye out for further guidance from the IRS throughout this year, as more information about qualifying products is expected to be provided at some point. In the meantime, your best bet is to reference the EPA’s certified wood stove database for more information about selecting high-efficiency products.

If you have still not turned in your tax return for 2020, you can still claim the Section 25(C) credit for biomass stoves for any qualifying purchases or installations that were completed on or before December 31, 2020.

Keep in mind, though, that not all people benefit from itemizing their taxes, so while you might qualify for this tax credit if you install a new system, it still might be in your best interest to take the standard deduction instead of itemizing. We strongly recommend you find a tax preparation professional to work with, so you can get more information about the best tax strategies for your particular financial circumstances.

Interested in learning more about the installation of wood and pellet stoves in Wausau, WI? Marcell’s Specialties Inc. has a wide selection for you to choose from, and we’re happy to answer any questions you have for us. For more information about what we have to offer in terms of fireplaces and accessories, get in touch today—we’ll be happy to work with you.

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