December, 2015: Wood Still Good, says the Fed

In December, 2015, the expired 2014 tax credit for energy efficient biomass-burning appliances was extended to include stoves purchased in 2015 and 2016. The package provides a $300 tax credit on the purchase of a qualifying wood or pellet-burning heater (previous versions offered a tax credit totalling 10% of the purchase price, UP TO $300). The tax credit is subject to a $500 “lifetime limit” and applies retroactively to appliances purchased between January 1, 2015 and December 31, 2016.

=================================================

2015 - 2016 Biomass Tax Credit Extension FAQ's

Q: How does the new 2015-2016 extension of the Recovery Act affect the purchase of wood stoves?
A: If you purchase and install a new, qualifying biomass (wood or pellet) stove between January 1, 2015 and December 31, 2016, you can take a $300 credit against your 2015 or 2016 taxes.

Q: So, what does it take for a stove to qualify?
A: The stove must be new, must burn biomass fuel, must achieve a thermal efficiency rating of 75% or greater, and must have been purchased and put into service by Decemer 31, 2016.

Q: Could I buy more than one stove and get a tax credit for each of them on this program?
A: Yes, if all are installed in your principal residence, up to the lifetime energy tax credit ceiling of $500.

Q: So, I could buy new stoves for the new house I'm building, my summer cabin and my rental house and get a tax credit (up to $500) for the total?
A: Nope, the credit only applies to stoves installed in existing principle residences. Your new house, summer cabin and rental don't qualify.

Q: Does this program apply only to wood stoves?
A: The tax credit also applies to other biomass appliances, such as pellet and corn stoves, as long as they achieve at least 75% thermal efficiency.

Q: Will this be some sort of deduction applied to my total wages, like a medical deduction?
A: This is much better: the credit comes straight off the bottom line on your return.

Q: Let's say I install a new wood or pellet stove in 2016 (Tax Credit $300) and I end up owing $300 taxes for that year. How much do I pay?
A: Nothing. Your $300 Biomass Tax Credit will cancel out your $300 tax obligation.

Q: What if I have a $500 tax refund coming back?
A: You get your refund, plus the $300 Biomass Tax Credit on your new purchase. Your IRS refund check will total $800.

Q: What if I only paid $100 in taxes last year? Do I still get my $300 Tax Credit?
A: Nope, you get $100. The credit cannot exceed the amount of taxes you paid in.

Q: I am on social security and pay no taxes, can I get the credit?
A: Nada. The credit is only against taxes you paid in (or still owe) for the year you put the stove in service.

Q: I purchased a wood stove for my home in 2011, and received a tax credit for $300. We've moved, and are now considering a wood stove for this house. Can I claim the $300 tax credit on my 2016 return?
A: Nyet. There is a lifetime limit of $500 on energy tax credits. You've already taken $300, so you only have $200 still available.

Q: Do all wood and pellet stoves qualify?
A: Only new stoves that achieve 75% minimum efficiency rating qualify for the tax credit.

Q: I checked the EPA label on the stove we want, and the efficiency rating was only 63%. Are we out of luck?
A: You might be OK. For some obscure reason, the EPA arbitrarily assigns an efficiency of 63% to all non-catalytic wood stoves, and 72% to all catalytic wood stoves. The real number is a result of actual efficiency testing, and can be viewed on the manufacturer's website.

Q: What if I buy a wood or pellet stove second-hand? Can I take the credit?
A: Negative. The law specifies that the credit can only be applied to the purchase and installation of new stoves.

Q: Are you sure? I found the original bill online at http://www.irs.gov/pub/irs-drop/n-09-53.pdf , and it doesn't say anything about new or used.
A: It helps to have a magnifying glass and a working knowledge of legalese, but it's there alright, in Part 3, Section 2 .05 (1):
"A taxpayer may claim a credit... only if each of the following requirements is satisfied:
(b) The original use of the item commences with the taxpayer."
If you buy a used stove, you're not the original user, and you can't claim the tax credit.

Q: What about the hearth, stovepipe, chimney parts & labor I'll need to complete the installation? Do they qualify for the tax credit?
A: Since the 2015 revision allows the maximum $300 credit for the stove itself,  installation expenses are a moot point.

Q: How do I prove to the IRS that I've purchased a qualified stove? Do I send anything in with my tax return?
A: Yes, you must fill out Form 5695, which you can download at https://www.irs.gov/pub/irs-pdf/f5695.pdf. Your credit goes on line 22a. Save your receipt for the stove and keep it in a safe place along with the Manufacturer's Certificate of Qualified Energy Property.

To return to the page you came from, close this page.

The Chimney Sweep, Inc.
913 Harris Avenue
Bellingham, WA 98225-7032
1(888)-354-6722 toll-free in U.S. & Canada
1(360)-676-9080 FAX
http://www.chimneysweeponline.com

To send us E-Mail, Click Standard E-Mail Window or (our reply form)
Copyright © 1996 - 2019 The Chimney Sweep, Inc.