Friday, February 9, 2018

$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.

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