Wednesday, January 2, 2013

Federal Tax Credit for Wood Stoves Reinstated and Retroactive

Update: As of January 1, 2014, there is no federal tax credits for wood heaters purchased in 2014.  The credit expired and there is only a slight chance that it could be reinstated, and even reinstated retroactively to Jan. 1, 2014.  If you purchased a wood or pellet stove or boiler in 2013, you are likely eligible for a $300 tax credit.


You need to use IRS Form 5695. Put $300 in line 22A and then use Line 52 to show that amount on your 1040 form. Click here for more advice (or consult with a tax professional as we cannot and do not give tax advice.) For more background and details about the tax credit, read on.

Alliance for Green Heat, January 2, 2013 - Congress passed a bill addressing parts of the Fiscal Cliff, and it included a reinstatement of the $300 tax credit for biomass heaters that are 75% efficient using lower heating value. Another provision of the bill extended the wind production tax credit for one more year.

The biomass stove provision allows the full cost of the equipment and installation up to $300 for stoves bought in 2013 and it is retroactive, so that all eligible stoves purchased in 2012 can also get the credit. This means that every stove purchase will be able to collect the full $300 tax credit because all EPA certified stoves cost more than $300 and virtually every EPA certified stove claims to meet the 75% efficiency threshold. However, a taxpayer could not collect the full $300 if they have already recieved tax credits under this provision in previous years and the total amount would be over $500.

This credit was allowed to expire at the end of 2011 and H.R. 8 extends it through December 31, 2013. In addition to the purchase price, consumers can include the cost of professional installation which is important to the proper and safe operation of biomass stoves.

The bill language that makes it retroactive did so by just extending the credit that existed in 2011, through  December 31, 2013:

SEC. 401. EXTENSION OF CREDIT FOR ENERGY-EFFICIENT EXISTING HOMES.
(a) IN GENERAL.—Paragraph (2) of section 25C(g) is amended by striking ‘‘December 31, 2011’’ and inserting ‘‘December 31, 2013’’.

The Alliance for Green Heat applauds the reinstatement of the tax credit for wood and pellet stoves. "This modest tax credit is important for low and middle-income consumers who need an affordable alternative to fossil fuels," said John Ackerly, President of the Alliance for Green Heat.

"However, when tax payer money is used for incentives, we believe it should go to the cleanest and most efficient stoves on the market, not all stoves on the showroom floor. The 75% efficiency standard is virtually meaningless because manufacturers can use any number of calculations to render all stoves eligible.This is a disservice to consumers who may unwittingly buy a 50% or 60% efficient wood or pellet stove and not enjoy the cost savings they expected," Ackerly said.

The provision relating to biomass heating equipment is part of a much larger package of energy efficiency equipment.  Despite efforts by some to increase the maximum rebate amount and make other changes to the biomass equipment and all the other pieces of equipment, Congress just extended the language that Congress had approved in 2010.

This tax credit extension for energy efficiency equipment, including windows, insulation and other HVAC equipment, is estimated to cost the US government $2.2 billion dollars.  The Alliance is trying to get the exact amount that the biomass heating equipment costs.

More details about the tax credit will be included in the Alliance for Green Heat's January newsletter, which will be sent next week.

7 comments:

  1. Mr Ackerley's assertions are actually mis-informed. (1) The 75% efficiency is based upon the Canadian Standard B4.15 for a Category 2 burn rate and Lower Heating Value. If a manufacturer is "making it up", that would be illegal, one must assume. Outside of the tax credit, there are many efficiency numbers that are made up by the "marketing department". A consumer should ask to see the Manufacturer's Certificate that the manufacturer must supply for the tax credit and not read numbers off of a brochure. (2) Rewarding the "most efficient" wood stoves only is a disservice to the environment. 80% of the stoves in North America used today are pre certified, dirty and inefficient models. The best opportunity to actually make a difference is to get them out of homes and replaced with current EPA product. The "most efficient" stoves are expensive and sometime finicky. Real world data says a simple to operate, affordable stove replacing an old one is the best investment for the environment. (3) Emission data does not equal efficiency.
    Thanks!
    Dave K

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  2. Thanks for that input, Dave. I think a lot of us are misinformed about this. There is no regulation or anything that says to be eligible for the tax credit, manufacturers should use Category 2 burn rate and B415. And there is nothing illegal about using any number of other methods. It would be really useful to know which manufacturers use Category 2 & B415, but info like that is not transparent. In fact, many manufacturers don't even release their efficiency numbers - they just certify that they are eligible for the tax credit, and its unclear which method was used. As for rewarding the most efficient wood stoves, I think the best reward is to give the consumer accurate, consistent info about efficiency. Once you get into 15, 20 or 25% differences in efficiency, that you routinely see with pellet stoves, efficiency differences can be pretty important to the consumer. We have found slight correlation between emissions and efficiency, but we only have access to limited data sets. With pellet stoves, there is a greater correlation and you are more likely to get a higher efficiency stove if you buy a low emission one. If all these issues weren't a bit complicated, it wouldn't be so damn interesting!
    John

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  3. It certainly keeps us on our toes. For the sake of transparency, this is Dave Kuhfahl of HearthStone. I had read on the HPBA web site (http://www.hpba.org/government-affairs/major-projects/25c-tax-credit) and heard from them that the method of measurement was as yet "not changed" by congress and therefore was still the same. I am looking again and you are right, it is a bit nebulous. We have used the method as described as I would not know what else I would want to go to court and defend. I saw a wood stove with a 90% efficiency tag on it recently and the dealer was selling it against ours. It certainly was a challenge not to "print" 90.5%. We, as a company have not worked that way. Until the tax credit of 2009, the only efficiency we had was the EPA default that we are still printing on every EPA hang tag, as required by law. This is true of all solid fuel burning appliances (including EPA pellet). There is a new pellet standard out now that provides for an efficiency number. Until this last year only a small fraction of the pellet stoves were even tested to any standard other than the 40:1 air/fuel ratio which made them exempt. Pellet stoves have long ridden the wave of acceptance based upon good marketing only. You have to consider the energy (footprint) to produce, bag and ship the pellets also. Any 40:1 exempt stove is unlikely to have any decent efficiency as there is too much air flowing through it. We did go through EPA certification with ours 3 years ago, and it was not as easy as everything you read might suggest. The bottom line: an "exempt "certified product might claim a higher efficiency than one that actually passed.
    As with many things in the culture in which we live, all that glitters is not gold. It challenges me to see how much information is flowing on the internet that is not factual. I know it is not most people's desire to mislead, there is just a lack of good data. I would say, if you are looking for a new stove, ask someone that has the model you like. Make sure you can live with "what it looks like". Get the features you like. (Long burn, slow heat/ fast burn quick heat) Only buy EPA certified and learn to use it. Good wood, and a good chimney will make more difference than the brand. We al had to pass through the same gates to get here. If you are curious, ask your dealer what method was used to arrive at the efficiency number in the brochure.

    Thanks John for the work you do. Knowledge is power, communication enhances knowledge. Stay warm,
    Dave

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  4. John,

    This subject of efficiency is especially interesting when it comes to qualified OWBs. Method 28 OWHH was the process for certification but it was found lacking so modifications were made to improve it. As I'm sure you're aware it's is now called Method 28 WHH. Supposedly, the changes better reflect thermal efficiencies, too. It appears that the LHV was also increased to 7938 BTU/LB.

    What I don't understand is if Method 28 WHH is the standard for certification why are some manufacturers using European EN303-5 to qualify for the tax credit? Is it because there are only two burn categories and the LHV is lower by 200 BTU/LB using this standard compared to Method28 WHH?

    Additionally, I still can't wrap my mind around how EN303-5 reflects real world efficiencies. Correct me if I'm wrong but It's my understanding when conducting the test using 303-5 the OWB never goes into close damper mode. As we all know this is completely outside the norm as to how these devices are operated in the real world. Most consumers purchase OWB's over sized and as a consequence they end up in close damper mode a large percentage of the time. If I'm correct how can 75 percent be achieved outside the lab?

    Also, I was hoping you could shed some light on the so called gasification process used in qualified OWBs. If the unit is not operated in a continuous burn mode does the gasification of the unit cease? If so, then I assume the PM measurement in the lab is also not realistic compared to use in the field?

    I was hoping you wouldn't mind taking a few minutes to answer some of these confusing questions. I really enjoy reading your newsletter.

    Roger

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  5. Roger,

    Interesting. I did not know that some US made outdoor boiler manufacturers were using EN303-5 to qualify for the 75% efficiency tax credit. I can't offer any insight into that, but our position has been that IRS needs to clarify how stoves and boilers should be tested so that the consumer can compare apples to apples. Many appliances and products get tax credits under IRS provision 25C but stoves are the only one where every single certified product on the market can claim the tax credit. This makes us look bad in the eyes of the energy efficiency movement.

    John

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  6. I bought a used Wood Insert at $1000 in 2013. Can I get this credit?

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  7. Ry,

    The IRS did not state whether inserts are or are not covered. However, based on the EPA's practice of treating inserts and freestanding biomass stoves similarly, manufacturers may choose to include inserts. You can find more information here:http://www.hpba.org/government-affairs/major-projects/25c-tax-credit

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