How to claim the $300 stove tax credit

Updated on Jan. 6, 2020 - Legislation just became law that provides a 26% tax credit for wood heaters, and ends the traditional $300 credit. Qualifying stoves purchased in 2020 can still receive the $300 tax credit by filling out IRS Form 5695.  Form 5695 will also used in 2022 to file 2021 taxes, where taxpayers can take the 26% credit if they purchased an eligible heater. 

Taxpayers purchasing eligible stoves in 2020 can still take the $300 tax credit on their 2020 taxes. To be eligible for the $300 tax credit, stoves or boilers need to have a 75% "thermal efficiency rating" or greater and be purchased in 2018, 2019 or 2020.

To claim the credit for 2019 and 2020 complete IRS Form 5695 when you file your taxes.  Wood and pellet heaters are covered under Nonbusiness Energy Property Credit on line 22A.  Do not include more than $300 on line 22A.  According to the IRS, your stove must have "a thermal efficiency rating of at least 75%" to take the $300 credit.  Any thermal efficiency ratings less than that would enter "0" on line 22A, and the taxpayer may not need to file Form 5695 at all unless they installed other eligible energy efficiency property in 2019.  Instructions for Form 5695, with other important qualifications, are here.  Online service such as Turbotax and Intuit have Form 5695 integrated into their software.

Taxpayers do not have submit receipts with their taxes but need to maintain receipts in their files. The EPA database provides verification of whether a stove is 75% efficient and is the only reliable place for consumers to determine efficiency numbers. If the EPA database provides an efficiency of less than 75% for a particular stove, it may not be eligible for the tax credit.

The EPA database is easily searchable
to find efficiency and emission ratings.

Unfortunately, many manufacturers are issuing certificates of eligibility for stoves that are far less than 75% efficient. For IRS purposes, consumers are allowed to rely on the manufacturers certificate, even if the stove is listed far below 75%.  However, if you want a higher efficiency stove, which is particularly important if you are in the market for a pellet stoves, first refer to the EPA database.

One retailer inaccurately advertised that "because this [64% efficient] model was EPA approved, it qualifies for the tax credit." Major manufacturers such as Drolet, Enviro, Harman, Jotul, Quadrafire, all claim stoves far below 75% (LHV or HHV) are eligible. V.P Berger, the President of Hearth & Home Technologies (HHT) that owns Harman and Quadrafire signed a manufacturers certificate claiming the Harman XXV pellet stove, at 66% efficiency and the Quadrafire Classic Bay pelet stove at 64% efficient were eligible.  Mr. Berger and others at HHT did not respond to calls or emails.   Even one pellet stove that is listed at 59% efficient is claimed to be eligible. 

If the IRS determines that a manufacturer's certificate is erroneous, the IRS can "withdraw a manufacturer’s right to provide a certification on which future purchasers of the component or property may rely, and taxpayers purchasing the component or property after the date on which the Service publishes an announcement of the withdrawal may not rely on the manufacturer’s certification.”  

These 2020 manufacturer certificates

all claim stoves under 67% efficiency

are eligible for the IRS tax credit and

are signed under penalty of perjury.

Two companies, U.S. Stove and England Stove Works, that dominate the market for lower cost and often lower efficiency stoves, stopped issuing certificates of eligibity for any of their stoves as of 2020.  If they had adopted the questionable and unexplained efficiency calculations of many of the big name brand manufacturers, they could have allowed thousands of consumers to claim the credit on their lines of stoves.  Both U.S. Stove and England Stove Works have eligible stoves that are over 75% efficiency (HHV), with England Stove Works getting three of their 2020 compliant pellet stoves between 76 and 79% efficiency, higher than the pellet stove efficiencies of bigger name brand stoves.

The Hearth, Patio and Barbecue Association (HPBA) would not take a position on loopholes used by manufacturers to qualify stoves that are in the low to mid 60s efficiency range.  AGH urged HPBA to advise manufacturers not to mislead consumers or the IRS.

There is a $500 limit is a lifetime limit for all energy efficiency property, including insulation, doors, windows or other wood or pellet stoves. So, if a taxpayer has claimed $300 in previous years, for example, they may only be able to claim $200 on their taxes for a qualifying stove.  The tax credit also applies to wood and pellet boilers and furnaces.   

Other heating and cooling equipment had far stricter qualification standards to ensure that consumers got a tax credit for a genuinely more efficient appliance or item.  

The 2014 tax break cost taxpayers about $42 billion.  The tax credit for stoves alone is not likely to cost more than $50 million and that’s if a majority of people who bought stoves learn about the credit and take it on their tax return.

$300 wood heater tax credit extended through 2020

Dec. 28, 2020 - Congress passed legislating signed by President Trump that gives eligible wood heaters a 26% tax credit in 2021and 2022, reducing to 22% in 2023 and expiring on Dec. 31, 2023 unless its extended.  This far larger credit, under Section 25D of the tax code, puts an end to the smaller $300 credit that was under Section 25C.

This map shows which states historically
have the highest percent of residents
claiming the energy tax credits, including
the credit for wood and pellet stoves.

Dec. 19, 2019 - Congress passed spending package that retroactively extended the $300 tax credit for wood and pellet stoves and boilers back to Jan. 1, 2018 and through Dec. 31, 2020.  This is the third retroactive extension in five years, making the tax credit an ineffective tool for both businesses and consumers to drive purchases towards higher efficiency applianes.

Stoves must be 75% efficient or higher to be eligible.  Check the EPA database of wood heaters to determine eligibility.

In January 2018, President Trump signed into law a budget deal that included a one year, retroactive extension of the wood heater tax credit for 2017.

Two pieces of legislation in the House of Representatives (Green Act and HR 4506) in 2019 would have increased the tax credit to either $400 - or 30% of purchase and installation costs, that would be more than a $1,000 credit for most purchases in specialty hearth retailers and more than  a $5,000 credit for most whole house boiler and furnaces installs.  Both of those bills were opposed by oil and gas interests who are fighting to keep their markets and by President Trump, who dismisses the need for more rapid deployment of renewable energy sources.

The two bills that would have raised the amount of the tax credit also clarified the eligibility of stoves and boilers, saying that efficiency should be measured using the North American higher heater value (HHV) calculation.  This would close several loopholes used in the past by most of the stove and boiler industry that used a European calculation with lower heating values (LHV) and sometimes using internal or optimal testing, instead of the average efficiency calculated by approved third party labs.

The tax credit in the December 2019 spending package could leave room for the main industry association, the Hearth, Patio and Barbecue Assocation (HPBA) to advise their members that they can keep self-certifying which stoves are eligible for the 75% tax credit, even if that stove or boilers is listed below 75% efficiency on the EPA's list of certified stoves and boilers. The loophole works like many Washington loopholes in that until the IRS clamps down on entities abusing a tax credit, they keep doing it.  The common sense definition of "a thermal efficiency rating of at least 75 percent" as stipulated by Congress should refer to the North American system that is accepted by the EPA and other HVAC industries.

The Alliance for Green Heat urges consumers to check with the EPA's list of certified wood and pellet heaters to confirm the efficiency of a unit and not rely on written or verbal assurances by manufacturers or retailers.

The Alliance for Green Heat is also calling on HPBA and stove manufacturers to publicly support and abide by a policy of only recognizing the average, overall efficiency of stoves based on third party testing at an EPA approved lab. In the past, virtually every stove on the market claimed to be eligible for the 75% efficient tax credit and tens of thousands of consumers were misled and purchased far less efficient heaters.   The American Council for an Energy Efficiency Economy (ACEEE) has also called on Congress and the IRS to define and enforce the 75% efficiency eligibility limit.

AGH will update this blog as it becomes more clear which companies are self-certifying stoves at less than 75% efficiency.

For more background on the wood heater tax credit, click here.

The wood heater tax credit comes and goes

Labs now test wood and pellet stoves
for efficiency but some manufacturers
ignore those tests and tell consumers
their stove are 75% efficient and
thus qualify for the $300 tax credit.

Dec. 2020 -  The $300 wood heater tax credit was about to expire on Dec. 31, but it got extended in a big way.  In 2021 and 2022, high efficiency stoves and boilers will now get a 26% tax credit on purchase price and installation costs.  In 2023, the credit will drop to 22%.  Heaters must be 75% efficient or higher, based on the efficiency provided on the EPA list of certified heaters.   See more details here.

Dec. 2019 - A federal tax credit had not in been in place for wood or pellet heaters in 2018 and 2019, but in December of 2019 it was made retroactively available back to Jan. 1, 2019 and through Dec. 31, 2020.  Congress stated that stoves needed to be 75% efficient to qualify, but manufacturers have ignored that and claim that almost all stoves qualify.

The Green Act, released by House Democrats in 2018 would have given wood and pellet heaters that are 75% efficient or higher a 30% tax credit, just like solar.  A similar bill in 2019 came very close to passing but didn't.

Feb. 9, 2018 - Today President Trump signed into law a budget deal that included a one year, retroactive extension of the wood heater tax credit for 2017.  Thus, consumers who bought stoves that are presumptively 75% efficient or higher may qualify for a $300 tax credit on their 2017 taxes.  Stoves purchased in 2018 or 2019 are not covered.  Click here for more detail on the 2017 tax credit extension.

Nov. 18, 2016 - Republican leaders on Capitol Hill say they do not intend to consider a tax extenders bill, that could have extended the $300 tax credit for wood and pellet stoves into 2017.  Currently, that credit is set to expire on Dec. 31, 2016.  Next year, a tax reform package could revive a wood and pellet stove tax credit, and make it retroactive to Jan 1, 2016.

Renewable energy and energy efficiency incentives appear less likely under a Trump administration with both houses of Congress controlled by Republicans.  A $300 tax credit for stoves was not significant enough to really tip the scales for that many consumers, and when it did they were just as likely to buy a very low efficiency stove, due to misleading advertising by most stove manufacturers claiming that nearly all of their units are 75% efficient.  This loophole that industry created has diminished support for the stove tax credit among key energy efficiency groups and may reduce its chances of being included in a bill in 2017.

Dec. 18, 2015 - The United States Congress passed a massive omnibus spending bill to fund the government and provide tax breaks to businesses and individuals.  Among them is the $300 tax credit to purchase a wood heating appliance.  The bill extends that credit through Dec. 31, 2016 and is retroactive to Jan. 1, 2015.

In a far more widely anticipated move, Congress extended the 30% tax credit for residential solar PV panels through 2019 and then gradually reduce it.  This credit was set to expire at the end of 2016 and offers that industry a level of support and certainty for strong growth.

For wood and pellet heaters, the bill extends the $300 tax credit, contained in Section 25C of the IRS tax code, which states taxpayers are entitled to a $300 tax credit for the purchase of a wood or pellet heating appliance that is 75% efficient or greater.  Consumers need to obtain a certificate from the manufacturer, stating that the appliance is qualified for the credit.

For consumers who purchased a wood or pellet stove in 2015, or who will do so in 2016, they will likely be entitled to the $300 credit if they have not used up their $500 lifetime maximum credit for energy efficient property. 

Wood and pellet stove manufacturers routinely mislead the public by claiming that virtually every single stove they make is at least 75% efficient, flouting the letter and intent of the law, which was to only qualify stoves at 75% efficiency or higher. As of May 15, 2015 all stoves and boilers certified in the US are tested for efficiency using the CSA B415.1-10 efficiency test.  This efficiency test provides a guideline for how to test and not all stoves will achieve an efficiency of 75%.

“Higher efficiency wood and pellet heaters deserve renewable energy incentives to help American families reduce reliance on fossil fuels and to encourage companies to build higher efficiency appliances,” said John Ackerly, President of the Alliance for Green Heat, an organization that advocates for wood and pellet heating. “In the past, some in industry has made a mockery of this tax credit, misleading tens of thousands of consumers into thinking they are buying higher efficiency stoves.  Its time to start measuring efficiency and reporting it honestly and only qualifying those heaters that are 75% efficient or higher,” Ackerly said.

The Alliance for Green Heat estimates that a third of all wood and pellet stoves could meet the 75% efficiency threshold, giving consumers a wide range of choices.  Appliances that are 75% efficient using the European lower heater value (LHV) are usually between 69 – 71% efficient using the North American higher heating value (HHV).  A leading industry expert, Rick Curkeet concluded in a 2008 letter to an industry trade association that "the intent of the solid fuel appliance incentive program recently enacted by Congress is ... to require a minimum of 69.8% efficiency."

Stove manufacturers are now required to disclose their efficiency and more than a quarter of all EPA certified stoves now have actual, verified efficiencies posted on the list of EPA certified stoves,  A few stove companies, such as Blaze King, Jotul, Kuma, Seraph, Travis, Woodstock Soapstone publicly disclose actual efficiencies of most of their models on the EPA website and almost all of those models appear to qualify for the tax credit.  However, other manufacturers still list one efficiency with the EPA, but maintain another efficiency definition that allows them to claim their stoves are 75% efficient to qualify for the tax credit.

Unlike other heating and cooling appliances, prior to May 2015 wood and pellet heating appliances did not have to test or report efficiencies and there are still few accepted norms on advertising practices.  Websites and promotional materials of many major stove brands contain exaggerated efficiency claims, some of which may come from the company’s internal laboratory, not from a reputable, third party lab.