Thursday, February 7, 2013

Important Clarification on Stove Tax Credit

Federal tax credit for residential biomass appliances is a full $300, not 10% up to $300

Alliance for Green Heat, February 7, 2013 - The hearth industry, the Alliance for Green Heat and scores of other institutions and companies have been incorrectly stating that the Internal Revenue Service (IRS) provides a 10% tax credit up to $300 for qualified biomass heaters.

In fact, the IRS provides a tax credit equal to expenditures up to $300 for qualified stoves. This means every qualified stove purchase will receive the full $300 unless the taxpayer already claimed a similar credit of $500 in a previous year.

The confusion arose because one set of energy efficiency improvements under 25C of the tax code are only entitled to a 10% credit up to a set amount. However, taxpayers who purchase biomass stoves are eligible under 25C(a)(2), which provides that qualified residential energy-efficient property may be eligible for a tax credit equal to the full cost of the equipment up to a set amount, which is $300 for biomass stoves.

Taxpayers filing with companies such as Turbo Tax, H&R Block or other tax preparation software should receive the full $300. While the error of stipulating that only a 10% tax credit is widespread among hearth retailers, manufacturers and others, it is unlikely that any professional tax preparation software would calculate the credit incorrectly.

The difference to taxpayers is substantial. For example, a $1,500 stove would only allow for a $150 credit, if the 10% provision applied. Click here for a copy of IRS form 5695 to claim the tax credit. A biomass stove purchase would be claimed in line 24 of form 5695.

For more information, visit our blog and this authoritative site:


The Alliance for Green Heat promotes biomass heat as a low-carbon, sustainable, local and affordable heating solution. The Alliance is a non-profit Maryland organization and is tax-exempt under section 501c3 of the tax code. For more information:

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