Last updated on June 1st, 2023 at 07:48 pm
This year, you can save on taxes by buying a wood-burning fire feature! In 2021 and 2022, U.S. consumers buying highly efficient wood stoves and larger residential biomass heating systems will be able to claim a 22% tax credit.
The credit is uncapped and based on the full cost of the unit, including purchase and installation. It will remain at 22% through 2023. Purchases and installations completed on or after January 1, 2021 through December 31, 2023 can qualify.
Does Any Wood Stove Qualify?
To qualify for the tax credit, you must have purchased and/or installed a biomass-fueled heater with a thermal efficiency of at least 75% per the higher heating value (HHV) of the fuel. You can reference the EPA-certified wood heater database or reach out to our team at Four Day Fireplace to find out which products qualify.
The product must have been purchased, installed, or both between January 1, 2021, and December 31, 2023. Biomass products purchased and installed before 2021 do not qualify for this particular tax credit.
Where Did the New Tax Credit Come From?
At the end of December 2020, a spending legislation and pandemic relief package was signed into law. The package included a tax credit for wood and pellet heaters, including stoves and whole-home heating systems.
How Does the Tax Credit Work?
Wood-burning stoves and heating systems will now qualify for a renewable energy investment tax credit through Section 25D of the Internal Revenue Code. Previously, only solar, geothermal, fuel cell, and small wind systems could qualify for this tax credit. The new tax credit eliminates a previous provision for biomass stoves under IRC Section 25C, which some consumers may have used on their 2020 tax returns.
You must claim the product on the tax return year in which the product installation was completed. If you purchased a wood-burning heating product in 2020 but installed it in 2021, you can claim it on a 2021 tax return.
With the new tax credit, you may see an increase in your tax refund. However, if your federal tax obligation is already low, you may not be able to claim the full tax credit amount.
Learn More About How to Get Your Wood-Burning Tax Credit
We encourage you to reach out to a tax professional if you have questions about how this credit applies to your tax return. Everyone’s tax situation is different, and what is true for one person may not hold for another.
Interested in Buying a Wood-Burning Stove?
Four Day Fireplace offers a wide range of fire feature products and can help you find options that work well in your home and help you qualify for a tax credit. Reach out to us today if you are looking for a wood-burning fire feature for your Western Washington home!