Tax Credit for Wood Burning Stoves

by Eric Novinson

To encourage the use of energy-efficient wood-burning stoves in residences, the government authorized taxpayers to claim tax credits for such stoves purchased and installed through the end of 2013. When it was introduced in 2009, the credit was worth 30 percent of the cost of purchase and installation, to a maximum of $1,500; in 2012 and 2013, the credit was reduced to 10 percent of the cost and capped at $300. The credit applied to many types of heaters that burn wood, including stoves that burn pellets of dried wood and other plant materials such as corn, fireplaces, and outdoor wood boilers that meet the federal program requirements.

Restrictions

To claim the wood burning stove tax credit, the taxpayer must install the stove in his primary home between and including 2009 and 2013. The credit was not applicable to non-resident taxpayers - the primary residence had to be inside the United States.

Related Costs

This credit included setup costs, such as the cost to deliver the stove from a home improvement store to the taxpayer's house and a contractor's fees for installing the stove. Also eligible for inclusion in the credit were materials specifically designed to enhance the stove's energy efficiency. According to the Department of Energy, hearths, chimney and stovepipes generally did not qualify for the wood burning stove tax credit.

Efficiency Verification

To claim the tax credit, the wood burning stove was required to have at least a 75 percent thermal efficiency rating. The government did not keep lists of stoves that met this requirement, but accepted manufacturers' certification statements that certified the energy efficiency. These certifications were easily available from manufacturers, usually by visiting their websites.

Claiming the Credit

Taxpayers claimed the wood burning stove tax credit by filing Internal Revenue Service Form 5695, Residential Energy Credits, with their federal Form 1040 for the appropriate tax years. The credit applied both to the stove being claimed and the residence it was installed in. If several taxpayers jointly own the home, each taxpayer claimed an equal portion of the credit. A married couple claimed the total credit if they share the primary residence, but could each claim a separate credit if they claimed separate primary residences and installed a qualifying stove in each house.

Tax Basis

Installing a permanent improvement such as a wood burning stove increases the value of a home, which adds the value of the stove to the home's tax basis. Claiming this credit reduces the tax basis of the home, so the homeowner could owe more income taxes if she decides to sell the home because the gain from the sale will be higher, according to the Internal Revenue Service.

About the Author

Eric Novinson has written articles on Daily Kos, his own blog and various other websites since 2006. He holds a Bachelor of Science in business administration from Humboldt State University.

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