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.