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2021 - 2023 Wood and Pellet Stove Tax Credit

Wood Stove Tax CreditAs of January 1, 2021, purchasers of wood and pellet stoves qualify for a major tax credit.

The team at Rockford Chimney Supply knows how much our customers love to save, and that’s why we wanted to get the news out as soon as possible: a new tax credit was signed into law on January 11, 2021, that greatly expands the tax credits available for energy consumption to Americans.

This new wood stove tax credit 2021, Sec. 25(D) of the tax code, greatly expands tax credits on energy. In the past, solar, geothermal, fuel cells, and small wind power generators qualified for this credit. 

Sec. 25(D) of the tax code, the Wood and Pellet Heater Investment Tax Credit (ITC), is a replacement of the previous tax code for wood and pellet stoves, Sec. 25(C).

What Are the Details?

The wood stove tax credit 2021 applies to all highly efficient wood or pellet stoves and biomass heating systems. Any customer who has purchased and installed a wood and pellet stove as of January 1, 2021, through January 1, 2023, will be qualified to claim a 26% tax credit based on the total cost. Total cost includes installation (venting and related materials; onsite labor).

This 26% tax credit is uncapped, meaning you can claim 26% tax credit on whatever the total cost of your wood and pellet stove. In 2023, this tax credit will decrease to 22%.

What Qualifies?

The language in the ITC indicates that the wood or pellet stove must be highly efficient. This means the stove must be at least 75% efficient per the HHV (higher heating value) of the fuel.

According to the new legislation, any stove that was purchased after January 1, 2021, or will be purchased through 2023, currently qualifies.

The IRS will make an announcement in 2021 with more information about which stoves qualify, but for now, you can check the wood heater database for EPA-certified stoves.

What About the Sec. 25(C) Tax Code?

The Sec.25(C) tax code provided an incentive for purchasers of larger residential biomass stoves to the tune of $300. Sec. 25(D) replaces that section. However, Sec. 25(C) may still be claimed on all 2020 tax returns.

How To Claim

You can file by mail or online to claim your Sec. 25(D) tax credit. 

Mail

If filing by mail, use IRS form 5695: Residential Energy Efficient Property Credit. As of early January 2021, the IRS has not yet updated its website for more information on 2020 taxes.

Online

If using filing software online, information about Sec. 25(D) can be found under “credits” in the Federal tax return. Look for a tab or button reading “residential energy.”

Previously Purchased Wood Stoves

Sec. 25(D) only applies to wood and pellet stoves purchased after January 1, 2021. However, it still may be possible to receive a credit on a previously purchased wood and pellet stove. You may contact the IRS directly to inquire. You will likely need to fill out an amended tax return, an IRS 1040X.

Further Reading

We will follow all news related to the wood & pellet stove tax credit 2021. Further information, when it is available, can be found on our website.

Click here for a helpful one-page summary provided by HPBA.

Want to take advantage of this credit, but don’t have an appliance yet? We carry wood and pellet stoves that fit the requirements and provide efficient heating! Shop our collection of stoves or ask one of our specialists what will work best for your needs.