$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.  

Wood and Pellet Stove Tax Credit Extended through Dec. 31, 2020

Stove manufacturers routinely claim
75% efficiency to be eligible for the
tax credit, even when stoves are far
below 75%.  The average wood and
pellet stove was around 70% and has
climbing since 2015.

Dec. 2019 update: Congress included the $300 tax credit for high efficiency wood and pellet stoves and boilers in a tax package expected to be signed by the President.  It retroactively covers eligible stoves and boilers purchased in 2018 and 2019 and those purchased in 2020. To qualify, stoves must be 75% efficient or higher.  You can check efficiency listings on the database of EPA certified heaters.  

2016 and 2017 update - click here.

December 2015 update: On December 18, 2015 Congress extended the $300 tax credit through end of 2016.  For more on the 2015/2016 tax credit extension, click here.

December, 2014 - A short term extension of the $300 federal tax credit to purchase a new wood or pellet stove was signed into law by President Obama on Dec. 19, 2014 after having passed the House and the Senate.

The law extends a host of tax provision through Dec. 31 2014, making it almost entirely a retroactive tax credit.   A two-year deal that would have extended selected tax credits through Dec. 21, 2015 fell through.





The tax credit, which started out at $1,500 applied to all stoves that were at least 75% efficient.  The stove industry used a loophole to help ensure that all EPA certified wood stoves and all pellet stoves could claim to be 75% efficient.  As a result, many consumers are unwittingly buying stoves that may be less than 60% efficient, or even less than 50% efficient.  Pellet stoves in particular can be very low efficiency, saddling consumers with unnecessarily high pellet fuel bills.

Because of this loophole, the stove tax credit has long been criticized in the energy efficiency community as being dominated by “free riders” because the credit applies to virtually every stove and does not push consumers toward the most efficient ones. Instead of giving consumers an incentive to buy higher efficiency or “greener” appliances, like Energy Star appliances that help people save money, the government has been giving a discount to all wood and pellet stoves (other than uncertified, exempt wood stoves.) 

Of the nearly 500 stove models on the market, manufacturers have disclosed actual, third party verified efficiencies for about 200. To date, most of the major pellet stove manufacturers have refused to disclose any actual efficiencies.  Seraph Industries, a very small pellet stove maker, has disclosed their efficiencies and they are quite high.

The EPA, nor any other federal or state agency involved in wood and pellet stove education, warns consumers that they are not necessarily buying a 75% efficient stove, as promised by manufacturers who issue certificates assuring consumers that their stoves are eligible for the tax credit.

The Alliance for Green Heat has been a long-time advocate of a robust tax credit, but only for stoves that are genuinely cleaner and more efficient.  The federal tax credit has never incorporated particulate emissions into its eligibility requirements.

Consumers who bought a stove in 2014, 2015 and 2016 can claim the credit on their taxes, assuming they have not exceeded the $500 limit for residential energy improvements.  

In addition to the federal tax credit, more states are beginning to offer incentives, including Idaho, Oregon, Maryland, Montana and New York.   There are now more than 30 stove change-out programs operating in about 10 states that offer generous incentives.