The residential energy tax credit expired with tax year 2016. Congress didn’t address this benefit in the new tax legislation signed into law in 2017. However, it’s possible that lawmakers may retroactively reinstate it in 2018. Here’s a detailed summary of the tax law changes.
Did you install an efficient biomass stove recently? If so, you may be eligible for a $300 energy tax credit.
- The credit is limited to 10% of expenditures, up to a lifetime amount of $500, for all energy improvements combined, although the stoves themselves have a $300 limit.
- File IRS Form 5695.
- Save receipts and labels.
- Installation costs are covered.
Here's What You Need To Know:
The Energy Star site has guidelines on what exactly is covered. It’s your safest bet for information on how to get the credit. Don’t rely solely on contractors who may not know the details or who promise their products will get the credit in order to make a sale.
Who doesn’t want to curl up in front of a cozy fire? Unfortunately, while flickering flames are inviting, most of the heat generated by a traditional fireplace escapes up the chimney rather than warming the house. Not only are you wasting money on firewood, but you also aren’t saving a dime on heating bills.
So-called biomass stoves, either freestanding models or inserts that fit inside a traditional fireplace, offer an energy-efficient solution. Most of these stoves burn wood or small wood pellets made of compressed sawdust. Some can use other sustainable energy sources like corn or grass for fuel.
The stoves burn cleaner and more efficiently than fireplaces, not to mention the wood-burning stoves of yesteryear, and are designed to radiate heat into a room.
Keep in mind that a stove usually heats only the portion of the house where it’s located, not the entire house.
A typical biomass stove costs between $3,000 and $4,500, including installation. In fact, installation is a critical part of the biomass stove. They must be:
- Sized for a room
- Vented to the outside
- Installed on proper surfaces at a safe distance from walls.
Incorrect installation may lower energy efficiency. Look for an installer who’s certified by the National Fireplace Institute.
Besides the stove, you’ll need a steady supply of fuel. Costs vary widely depending on time of year, availability, and the region where you live.
Let’s say wood pellets are selling for $5 per 40-pound bag, and you use half a bag a day for six months. That adds up to $450, plus you need a dry place to store nearly two tons of pellets.
Budget three hours a week during heating season for fueling the stove and removing ash. (Seasoned wood and premium wood pellets leave less ash than low-grade fuels.)
In general, a wood or wood pellet stove can cut heating costs by 10% to 40% when combined with zone heating techniques, according to Leslie Wheeler of the Hearth, Patio & Barbecue Association. That’s a savings of $64 to $255 a year for the average home owner. Though fuel prices can fluctuate wildly, savings could be even greater if you rely on pricier electricity or fuel oil for heating, rather than natural gas or propane.
EPA regulations for biomass stoves changed in 1991, requiring them to be more efficient and to produce less smoke, about 60% to 80% less than older stoves or traditional fireplaces. Thermal efficiency for tax credit-qualified stoves must be rated at least 75%, meaning three-quarters or more of the fuel is turned into heat.
Although wood and wood pellet stoves are most common, biomass fuels can come in a number of renewable forms such as corn or even aquatic plants. Stoves capable of burning a variety of fuel types are more expensive.
In addition to lowering heating bills, biomass stoves reduce emissions as well as dependency on non-renewable fuels like heating oil, kerosene, and natural gas. But before you commit to one of these stoves, inquire about local laws governing wood burning. Some areas, particularly in California, limit when you can burn wood due to pollution concerns.
This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to your particular transaction or circumstance. Consult a tax professional for such advice.