Expanded tax credits for modern, high efficiency wood and pellet heaters a big step in the right direction

Maine Senators Collins and King were
primary, bi-partisan champions of an
investment tax credit for wood heat.

Update for 2023 - The legislative victory that achieved the 26% tax credit in 2020, has now been upstaged by a law that will give a 30% tax credit as of Jan. 1, 2023.  The only downside to the 30% credit is that is has a $2,000 cap, which makes it of little value for homeowners who want to install very expensive whole house wood or pellet heating systems. Click here for our blog on the 2023 - 2032 wood heater tax credit.

2020 - 2022 - On December 28, 2020 President Trump signed into a law legislation passed by Congress which was the largest renewable energy spending bill in a decade and included incentives for solar, wind, advanced wood heat and a host of other technologies. This marks the first-time modern wood heating systems have been granted an Investment Tax Credit (ITC), rather than the far smaller tax credit wood heating technologies had been receiving.

The incentive provides a 26% tax credit for stoves and boilers that are 75% efficiency or higher. Consumers can easily identify efficiency levels by checking the EPA lists of certified wood and pellet heaters. The credit has no upper limit and lasts for three years, declining to 22% in 2023.

The effort to pass such an ambitious bill was led by the Biomass Thermal Energy Council, who started lobbying for it in 2009. In recent years, another significant push was led by Charlie Niebling, a consultant for Lignetics and former Chairman of BTEC. The Alliance for Green Heat contributed time and resources to both of these efforts, along with many other BTEC members.

As the founding Chairman
of BTEC, Charlie Niebling
was a chief architect of the 
bill and perhaps its most
ardent advocate.

Many Senators and members of Congress signed on to various iterations of the bill over the last decade, but it was Senator Collins and Senator Angus King who provided the final push, along with Chairman Richard Neal in the House of Representatives.

The legislative effort gained momentum as new EPA regulations required wood and pellet heaters to be cleaner and to disclose their efficiencies. “This is an important step forward but it is only one piece of a much larger puzzle to modernize the technology and the test protocols,” said John Ackerly, President of the Alliance for Green Heat.

Analysis

Wood and pellet heaters that at least 75% efficient are cleaner on average than those that have efficiencies below this threshold. Pellet stoves that test over 75% efficient emit five times less carbon monoxide (CO) than those with efficiencies under 75%. Wood stoves that test over 75% efficiency emit less than half of the CO of their less efficient counterparts.

The 75% efficiency threshold favors pellet technologies, as consistently dry fuel and automated combustion make it far easier to achieve consistently higher efficiencies. Sixty percent of all pellet stove models are over 75% efficient, compared to only 40% of wood stoves. Most catalytic and hybrid wood stove models are above 75% efficient, but only 12% of non-catalytic stoves will be eligible for the tax credit.

The seventy-five percent efficiency requirement was originally chosen about seven years ago, when fewer appliances could meet that level. With today’s technology, 75% efficiency is not a particularly high threshold, but it is much higher than how the 75% threshold was interpreted by industry to meet the previous $300 wood heating technology tax credit. That credit, under Section 25C of the tax code was also pegged to 75% efficiency but Congress did not consistently specify high heating value.

Using efficiency as the sole metric to identify wood and pellet heaters to receive public subsidies is a blunt and imperfect metric but satisfies legislators’ need for simplicity. Particulate matter (PM) emissions from cord wood stoves and boilers are a more important metric for public health. Efficiency is a more valuable tool for pellet appliances since their lab tested efficiencies are a reliable indicator for the efficiency homeowners' get. But wood and pellet appliance manufacturers sometimes purposely lower their efficiency to achieve other goals valued by consumers. Some pellet stove manufacturers use excess oxygen, leading to lower efficiency, to keep the viewing glass clean. Some wood stove manufacturers use excess oxygen to achieve cleaner, faster combustion and to prevent the operator from giving the unit too little air, which causes smoldering. The State of Alaska is currently exploring new metrics to identify cleaner wood heaters, including using the amount of PM created during the first hour of certification test burns.

Using efficiency as a metric does help deploy heaters that will save consumers money with a low-carbon renewable. Since the early 1900s, wood fuel has been the primary way that American households have avoided or reduced fossil heating fuel. An estimated half of American households who heat with wood gather all or most of it themselves, making it a highly sustainable fuel in a country with extensive forest cover.

This bill will help Americans afford to replace older wood heaters or buy higher efficiency ones and have them professionally installed because the tax credit covers the cost of installation. It will also help scores of small pellet mills across the country that mainly use sawdust produced by sawmills. Finally, the bill will also help manufacturers of more efficient wood and pellet appliances and encourage them to redesign heaters to be more efficient.

Benefits of a tax credit do not help everyone equally. Lower income families benefit far more from a rebate granted at time of purchase and many do not have the income level to benefit from a tax credit. And, the 75% efficiency threshold excludes the value wood stoves sold at hardware chains that are affordable to lower income households. Unlike wood stoves, many low cost pellet stoves are at least 75% efficient.

“The Alliance for Green Heat applauds this increased tax credit and calls on Congress needs to do more,” said Ackerly. “We need a dedicated federal fund to switch old, uncertified stove to cleaner heating technologies, similar to the federal program for diesel trucks. We also need increased funding for DOE and National Labs to focus on R&D to develop a new class of automated wood stoves and smart pellet appliances that integrate with solar and heat pumps and reduce electricity demand during winter electricity peak events,” Ackerly continued.

A separate bill included report language that directs the DOE to continue the $5 million grant program for R&D to modernize residential wood and pellet heaters. The Alliance for Green Heat worked with Senator Collins’ office to ensure this report language was included again.

The massive omnibus package included other provisions that could help advance cleaner and more efficient wood and pellet heating:

• $1.7 billion reauthorization of the Weatherization Assistance Program to support low-income families by retrofitting homes with cost-saving clean energy technologies.
• Robust funding for EPA “core” programs to protect clean air.
• Reauthorization of the EPA Diesel Emissions Reduction Act (DERA) program, which is a model for a national wood stove change out program.
• $200 million timber hauling businesses that experienced a loss of at least 10% of gross revenue between January 1, 2020 and December 1, 2020, compared to the gross revenue earned in the same period in 2019.

 Related stories

Guidance on the 26% tax credit for 2022 and changes for 2023 (Oct. 2022)

AGH urges IRS guidance to recognize efficiencies in the EPA Database (Feb. 2021)

Alliance for Green Heat calls on President-elect Biden to support and help transform wood and pellet heating

Press release

Contact: John Ackerly

202-365-4765

Nov. 16, 2020 - The Alliance for Green Heat congratulates President-elect Joe Biden and Kamala Harris on their 2020 presidential victory and welcome their commitment to scale up renewable energy and energy efficiency.

This change of administration offers the United States a historic opportunity to reduce fossil fuels through a range of renewable heating solutions and energy efficiency measures. We have already begun to decarbonize our electric grid, and now it’s time to also focus on our heating sector which can reduce heating costs for families across the country, buoy economic recovery and create good-paying jobs.

The Alliance for Green Heat’s supports all renewable heating options as well as strategic pairing of heat pumps, geothermal, solar thermal and solar PV with wood and pellet heat technologies (our specialty). The role of decentralized renewable thermal technologies, including wood, solar thermal and geothermal is essential along with the electrification of heat as our electric grids slowly become more renewable. The electrification of transportation is creating massive demands for new generation and distribution. This combined with very high peak demands in the cold, short daylength northern tier of the country calls for strategic deployment and use of non-electric heating technologies. Rural areas need special attention given the cost of new infrastructure.

Executive Branch

The Biden Administration, through executive action, can immediately begin to drive markets toward beneficial forms of advanced wood heating. It is essential that Biden’s administration analyzes small-scale wood heating as having unequivocal carbon benefits. This includes:

• Ensuring there is an in-depth, science-based analysis to account for carbon content of wood used for residential and small-scale institutional heating that is separate and distinct from the analysis used for larger scale biomass to electric pathways.
• Use the power of procurement, as outlined by the Climate 21 initiative, to “bolster markets for climate friendly products such as … heating systems that use wood pellets” in federal buildings, starting with more rural buildings in colder climates.
• Directing the GSA to require rural federal buildings to consider heating with wood, chips or pellets where it is economically feasible.
• Prioritize an interagency working group on bioenergy to focus on small scale thermal wood.
• Include environmental justice considerations in bioenergy projects and expanding employment opportunities for Native Americans and low-income populations in rural areas.

Agencies

EPA: 

We urge the EPA, under new leadership to give more priority to one of the most popular and commonplace renewable energy solutions in the country. To this end, we encourage the EPA to

• Invest in the expeditious development and adoption of test protocols that resemble how homeowners use wood heaters (we use the term “wood heater” to include wood and pellet stoves, boilers and furnaces).
• Prepare the groundwork for a national wood stove exchange program to replace old wood heaters with cleaner alternatives.
• Put resources into the offices that certify wood heaters so that the process is expedited and includes a full review of all testing requirements
• Ensure the EPA’s Science Advisory Board (SAB) evaluates the carbon benefits of residential and small-scale institutional wood and pellet heating based on studies of how that wood is gathered and obtained by households and small institutions.

DOE:

• Issue a Statement on Scientific Integrity that reaffirms DOE’s commitment to renewable energy pathways that can be deployed in the short term, including wood heating.
• Expand the focus of the Bioenergy Technologies Office beyond liquid fuels to include biothermal and provide additional grants for automated, next generation wood heating technology.
• Develop strategies that utilize wood heating as an integrated approach to mitigate grid-load growth risks caused by rapid electrification in the country’s northern tier.

USDA:

• Prioritize the utilization of wood thinnings removed from high-hazard forests to be used for local heating of homes and institutions in those areas.
• Ensure Rural Development Housing programs allow for and encourage the installation of modern, automated wood heating.
• Increase funding to the Community Wood Energy program.

Congress:

We urge the Biden administration to work together with a closely divided Congress to:

• Incorporate the BTU Act into any renewable energy or tax legislation to ensure that the most carbon beneficial pathway for low-grade, bi products of sustainably harvested wood is included.
• Expand tax credits for energy efficient appliances including the cleanest and most efficient wood and pellet heaters,
• Expand funding for the DOE to continue the R&D program to modernize residential wood and pellet heating technology
• Establish a national program to retire older wood heaters in exchange for heat pumps, pellet heaters, and in some cases, new wood heaters.
• Ensure that weatherizing programs inspect wood and pellet stoves just as they do with gas and oil furnaces for both safety and efficiency and provide avenues for repair or replacement, if needed.

The Alliance for Green Heat promotes wood and pellet heat as a low-carbon, sustainable and affordable residential energy solution. The Alliance works to advance cleaner and more efficient wood heating appliances, particularly for low and middle-income families.  The Alliance runs the semi-annual Wood Stove Design Challenge to encourage innovation and automation in wood stoves. Founded in 2009, the Alliance is a 510c3 non-profit organization based in Maryland.  

AGH urges DOE's bioenergy office to expand focus of funding

The Bioenergy Technologies Office of the U.S. Department of Energy recently asked for input on promoting the development and testing of low-emission, high-efficiency wood heaters. The deadline to reply is 5:00 PM on Monday, September 21, 2020 and the Alliance for Green Heat (AGH) continues to urge stakeholders to provide feedback to the DOE.

Diagram of stove field testing unit.

We also urge stakeholders to reinforce points made by AGH in your submission to the DOE. Please feel free to copy any of the points we make below, put them in your own words and/or develop them further. If you feel any of our points are off-base and should be changed or expanded, please email John Ackerly at jackerly@forgreenheat.org. For more background, click here.

Dear DOE,

Thank you for requesting input through this Request for Information (RFI). We are especially thankful that BETO has embraced this relatively small effort to distribute $5 million to support developing and testing new wood heaters. We are also mindful that the effort required to run a $5 million grant program may be similar to the effort required to run a $50 million program.

The wood heating manufacturing community has not had this kind of support from a government agency in the past several decades. However, it came at a time when the manufacturing community was in the final stage of testing to meet the stricter 2020 EPA emission standards. Much of the community does not have experience applying for federal grants, which can be challenging for smaller firms.

R&D labs could apply to test stoves after certification to help assess effectiveness of designs on emission performance.

We are encouraged that some of the questions posed in this RFI may indicate BETO is open to expanding the focus of future grant cycles. Questions on the performance of stoves already installed in homes and field testing are important as they embrace the life cycle of heaters. Congressional language has urged BETO to “support development and testing of new domestic manufactured low-emission, high efficiency residential wood heaters.” Testing of new heaters can also occur once they are installed in the field. Testing can include various iterations of round robin testing before or after certification. And, the development of new heaters can include the development of component parts, software applications, and other essential stages in the development process, not just the final act of assembling a finished stove for certification.In short, we fully support BETO to follow the Congressional language and not add additional restrictions or preconceptions about the traditional stove certification process.

We think that the barriers to developing and testing new stoves are not the only barriers stove manufacturers face. Thus, we are unsure if the list of technical questions you ask will solicit robust feedback on many key issues pertaining to the development of heaters. The engineering expertise and solutions to these questions can be built up. Many academics, non-profits and jurisdictions are eager to engage in more field testing of new stoves, and to do additional types of testing before deployment. 

 

Norbert Senf, AGH's board chair, introducing the SBI team at the 4th Stove Design Challenge. SBI later won one of the DOE grants with their US partner.

We understand from discussions with industry that few of the larger mainstream stove manufacturers have applied for grants in the last two grant cycles. Yet, there are urgent funding needs in the broader wood heating sector to help the development and testing of genuinely cleaner and more efficient wood heaters.

Renewable energy technology development often happens quickly when there is significant government subsidies and expanding consumer demand. The DOE’s programs supporting solar PV, paired with Congressional support for significant tax breaks, is a good example.

BETO’s program can help on the technical side of this equation by promoting the development and testing of heaters that meet the requirements of modern renewable energy incentive programs. These programs often need to better understand field performance characteristics of the technology in question.

Round robin testing at US stove labs are badly needed to assess testing variability.

Unlike some European counties, U.S. federal and state agencies have barely ventured into the realm of aggressively promoting the cleanest heaters, which first requires the development and testing of classes of heaters that are appropriate for greater deployment. State policy frameworks are beginning to shift from decarbonizing electricity solely to also include decarbonizing heat, and it is likely that the federal government will do so as well in coming years. BETO can play a vital role in preparing for this by focusing on technical issues related to heater development and testing.

We are providing answers to those questions where we have the most expertise and where we think BETO can be most influential.

Technological Barriers

1. What are the critical technical hurdles for improving performance of stoves for new installations (e.g. combustion chamber design, combustion air management, controls, mixing, sensors, etc.)?

A. We applaud BETO’s focus on supporting efforts to develop automated heater controls, as these are one of the most effective ways to improve performance over the lifetime of the heater.

2. What are the critical technical hurdles for improving performance of stoves already installed in homes (e.g. combustion chamber design, combustion air management, controls, mixing, sensors, etc.)?

A. Some technical solutions, such as adding an ESP, exist; however, these quickly can become more expensive than a stove replacement. The most cost-effective changes relate to the fuel used, and significant change in this area may require new local and state firewood regulation. For BETO’s mandate to support not just the development of heaters but also testing, there is much work to be done on testing new heaters that have just been installed in homes to better understand how performance can be improved.

3. What practical and new techniques are used to significantly reduce transient emissions (startup, shutdown, load changes)?

A. Automation of stoves is one of the most promising ways to improve transient emissions. Changes in test methods are also vital, and test methods depend on developing data about transient emissions and making that data transparent to the public.

4. What practical and new techniques are used to measure transient emissions that could be implemented in laboratory or field testing?

A. There is an increasing variety of technologies to measure not just transient emissions, but all emissions, both in the lab and in the field. The problem is that there is little funding or mandates for them.

5. How can new exhaust emission control technologies be developed and practically deployed?

6. How could integrated hybrid systems, in which biomass heaters are combined with other technologies such as heat pumps, solar, and high efficiency gas and liquid-fired appliances, be a route to reduced emissions? What are the technology barriers to this approach?

A. Many of these systems exist as prototypes or are on the market, especially in Europe. There are few technology barriers to this approach. When policies mandate increasing residential renewable heating, hybrid systems will emerge to make use of the strengths of different technologies and the seasonal costs and availability of electricity, solar, biomass and stored energy. BETO could play an important role by focusing future FOAs on hybrid systems and making R&D funding available for the integration of wood heaters with heat pumps. Funding could be routed through heat pump companies, wood heater companies or even software companies to achieve this. Integrating solar thermal with biomass thermal also holds tremendous potential.

Annual emission testing using handheld devices like the Testo 380 is vital to understand impacts of wear and tear on emissions.

7. How could field measurement methods be improved to ensure that biomass-appliances do not create local air quality issues in long-term use?

A. Testing new heaters in real world settings is vital before and after the certification process. Manufacturers need equipment to enhance their beta testing in homes during the winter(s) before they finalize and certify products. Academics and non-profits can use existing or newly developed equipment to test emissions of newly certified heaters once they are installed in homes. In terms of ambient air quality, a variety of sensors, including the Purple Air sensor network, exist or could be developed to help understand impacts of stove groupings. States that have enforcement capacity and use opacity criteria in the field, such as Washington State, have experience with identifying and understanding why certain stoves may be particularly problematic. Sensors or sensor networks could also calculate the benefits of deploying the cleanest heaters, instead of perpetually trying to monitor, enforce and manage emissions of traditional certified wood stoves that can burn unseasoned wood at low air settings at any time.

8. What stove features commonly encourage end-users to purchase new or replace a wood heater? Or, what stove features are commonly attractive to the end-user?

A. Price is a top consideration. Clean glass is another. Aesthetics are always a driving factor. The actual or perceived ease of use can be very important. Heating capacity, log size and burn time are key for many consumers. There are also different considerations for wood versus pellet stove customers, and for those looking for a primary versus a periodic or secondary heater. Fuel management is also a big issue, with some operators switching to pellets to avoid the enormous work of wood stoves, and others giving up pellet stoves because they can’t lift 40-pound bags. For pellet stoves, durability, reliability and access to professional service should be higher priorities than they are currently. BETO could play a very productive role in developing durable pellet stoves that use interchangeable, easily sourced replacement parts, for example.9. What advantages or disadvantages would continuous field performance data provide for advancing stove designs?

A. This sort of data is extremely valuable, and funding programs to collect it would help develop and test new wood heaters. This data is also helpful in developing new test protocols, which in turn would lead to changes in stove design. Depending on the metrics produced and how they are communicated, data could help consumers operate stoves better. It could also help stove R&D departments, especially if the data came from the stove manufacturer's own stoves. If this data is only available in summary form via a regulatory agency, it would have diminished applications. There is tremendous potential and a wide range of opportunities to gather certain types of field performance for different stakeholders: users, neighbors, retailers, manufacturers, air quality agencies, academics, etc. Continuous field performance data is currently collected by solar PV installers, internet providers and auto makers, for example, for a wide variety of purposes. One of the most obvious is to help with remote trouble shooting, which in turn leads to the R&D of software and hardware that avoids those issues.

Tools and Capabilities

1. How are trial-and-error test methods used to improved stove performance and advance stove design (i.e. development by implementation of incremental change and testing)?

2. Is access to performance testing facilities a barrier to development?

A. Most mid-sized and larger manufacturers have their own in-house labs for testing. Increasingly, the definition of a testing facility or testing lab is broadening, as more affordable and handheld equipment comes on the market, enabling anyone to enhance their in-house testing capacity. The third-party labs used for certification have the capacity to handle testing but the time and cost involved is a barrier. If the time and cost involved were less, companies may engage in more R&D and update their stove designs more often. Currently, when a stove model gets certified, it can remain unchanged on the market for 10 or 20 years, or until required by the EPA to test again to meet a new NSPS.

3. What in-house test methods are relied upon to validate and facilitate wood heater development?

4. How much could rapid performance measurement methods shorten R&D test cycles?

5. What specific test methods would be of interest to your enterprise?

A. A variety of test methods and practices are of great interest to AGH, starting with cord wood testing using test methods involving multiple labs, or being used on new stoves after installation in the field.

Stove testing is often considered as exciting as watching paint dry. Here, AGH researcher Gabriel McConnel assists in DOE's Brookhaven lab in advance of a Stove Design Challenge.

6. How are modeling and simulation tools being applied to improve wood heater designs?

7. How could modeling and simulation tools be improved to meet your needs?

8. What are the fundamental modeling gaps to enable broader use of modeling and simulation such as Computational Fluid Dynamics (CFD) to improve wood heater design?  

9. How are current measurement methods meeting your needs for evaluating performance and emissions from wood heaters? What could be done better?

A. Current methods usually do not evaluate heater performance apart from the narrow conditions under which they were tested. There is much potential in affordable measurement methods. The more complex part is whether manufacturers will have the motivation to use them.

10. What performance/emissions measurements are most challenging to obtain? What makes obtaining these measurements challenging?

11. What are three primary challenges your enterprise faces for advancing stove designs?

A. 1. Funding. AGH could engage in extensive activities to advance stove development and testing with more funding.

2. Lack of a more robust community of academics, non-profits, agencies and private sector companies involved in innovative stove designs and testing.

3. Lack of policy frameworks that focus on decarbonizing residential heating and a lack of incentives for the very cleanest and most efficient heaters.
 

Sincerely,




John Ackerly,

President

Alliance for Green Heat

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.