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2012 - 2013 Biomass Tax Credit Extension

Did you know an EPA approved fireplace, stove, or insert heats your home more efficiently and with less impact on the environment than any other heating fuel option. In addition to helping consumers lower their energy bills at home, the energy-efficient products eligible for the federal tax credits actually lower the amount of federal income taxes that taxpayers (you) must pay Uncle Sam.

A federal tax credit on 75 percent efficient biomass heating appliances, which expired on December 31, 2011, was reinstated by the “fiscal cliff” legislation, the American Taxpayer Relief Act of 2012 (H.R. 8), signed by President Obama on January 2, 2013. The bill includes a “tax extender” for Internal Revenue Service Section 25C which provides a tax credit for, among many other things, qualifying biomass burning stoves. The extender provides a 10 percent tax credit of up to $300 on a qualifying biomass heating appliance purchased between January 1, 2012 and December 31, 2013. The credit claimable on the purchase or installation of qualifying biomass units is limited to a “lifetime limit” of $500 (and may be impacted by the purchase or installation of other products that qualify of a 25C credit).

Things You Need to Know:

  • This consumer tax credit is 10% (with a lifetime cap up to $500) for the purchase and installation of a 75% efficient stove or insert, and is available in both 2012 and 2013.
  • The home improvements tax credit applies for improvements "placed in service" from January 1, 2012, through December 31, 2013.
  • To be considered, a stove or insert must use the burning of biomass fuel to heat a dwelling unit or to heat water for use in such a dwelling unit, and have a thermal efficiency rating of at least 75% as measured using a lower heating value. Biomass fuels are derived from renewable and sustainable sources such as wood, pellets, corn, and switch grass that are alternatives to fossil fuels. Some biomass fuels are even considered carbon neutral, or better, utilizing waste products from other industries such as cherry pits and sawdust.
  • Manufacturers are required to provide a certificate of eligibility for any product that meets the IRS guidelines of a "Qualified Energy Property".
  • The installation cost may also be covered under the energy tax credit including chimney pipe and hearth materials, as long as it is a requirement for the stove's proper and safe functioning.
  • You will need to file IRS Form 5695 with your taxes. In addition, you will need to keep at least receipts proving that you purchased the improvements and a copy of the manufacturer's certification (links to manufacturers sites are below). Accountants and tax advisors should also be able to provide more guidance.

We recommend that you read our FAQ's about the 2012 - 2013 Biomass Tax Credit Extension; however you should consult your tax advisor if you have ANY questions about how this measure applies to your particular circumstance.

Manufacturer IRS Certificates of Efficiency

Magnum / American Energy Systems
US Stove