The 2022 Federal 26% Tax credit on Wood & Pellet Stoves

THE FEDERAL 25D TAX CREDIT ON WOOD AND PELLET STOVES CAN SAVE YOU OVER $1000!

How so?

On December 28th, 2020, a new legislation was signed to create an Investment Tax Credit (ITC) for home heating equipment. This new Tax Credit is under section 25(D) of the US Internal Revenue Code (IRC or Tax Code). It came into effect on January 1st, 2021 and will last until December 31st, 2023.

What is the Wood and Pellet Heater 25(D) Tax Credit?

Since January 2021, American consumers buying highly efficient wood or pellet stoves, or larger residential biomass-fueled heating systems will be able to claim a 26% tax credit that is uncapped and based on the full cost (purchase and installation) of the unit. The stove tax credit is set at 26% for both 2021 and 2022. It will step down to 22 percent in 2023. This provision is part of the BTU Act and was part of the pandemic relief package.

This Wood and Pellet Stove Tax Credit is the most there has ever been in our recent history. The 26% tax credit is calculated from the total cost of the appliance and its installation cost, including the chimney, the floor protection and labor. Past Tax Credits only applied to the purchase of the fireplace. Further down in this article, we will present you with a few scenarios on how generous this program is.

Do all pellet and wood fireplaces qualify for the federal tax credit?

The answer is no. In fact, most wood stoves, inserts and fireplaces on the Market do not qualify. Why? The legislation aimed at helping consumers get more efficient heaters. So, the ITC is requiring the biomass-fueled stoves (wood or pellet heaters) to boast an HHV* of 75% efficiency or higher. (HHV stands for Higher Heating Value) At the time we are writing this article, there were 148 listings of wood heaters approved by EPA. Only 52 of them qualify for the Tax Credit. 51 Pellet Stoves qualify out of 101.

How do I know if the stove I am buying qualifies for the federal tax credit?

The EPA has created and is maintaining the official Wood Stove Database. As you get on the database, click on ‘Most Efficient’ to start your search. Move the Efficiency Indicator to bring it to 75% efficiency and click on ‘Do Search’. This will generate the list of all pellet and wood heaters that are 75 percent efficient and more. If the heater you are shopping for is not on that list, it simply does not qualify for the Federal Tax Credit. It is important that you refer to this list, as this is where the IRS is looking into when auditing.

Is the 26% tax credit really worth it?

Most of the heaters that qualify are more expensive than those that do not. The question is relevant. Heaters found in Mass Merchants are so much cheaper, is it really worth the trouble? Well, how about we do the Math together?

Example 1 –

Medium Size Wood Stove sold at a Mass Merchant: $800 to $1000; Chimney System: $1500; Hearth Pad: $400; Installation: $750 = Total: $3450-$3650

Medium Size Wood Stove Qualifying for Tax Credit, sold at a We Love Fire Partner Store: $2599, Chimney System: $1500; Hearth Pad: $400; Installation: $750 = Total: $5249 less 26% ($1364.74) = $3884.26

For about $200 more, you are getting a cast-iron stove made in the USA, with high-quality soapstone inside and a very strong warranty. Plus, our partner stores will take very good care of you.

Example 2:

Medium Size Pellet Stove sold at Mass Merchant: $1699. Chimney System $400; Hearth Pad: $400; Installation: $600; Total: $3099

Medium Size Pellet Stove Qualifying for Tax Credit, sold at a We Love Fire Partner Store: $3499, Chimney System: $400; Hearth Pad: $400; Installation: $600 = Total: $4899 less 26% ($1273.74) = $3625.26

For about $600 more, you get a much nicer stove, made in the USA or Europe, quieter, more reliable, etc.

Not only the gain in energy efficiency will make you save on fuel over the next two decades, you get a very good upgrade for a little more money. If you were offered to buy a Cadillac for $500 more than a Kia, would you do it?

If the IRS is offering you money to enhance your home, why not do it?

Another benefit is in the spirit of it. For some of us, we like to support local family businesses. Buying local feeds our local economy. Our network at We Love Fire is solely based on family businesses across the country. We pride ourselves on offering high-quality products and services. This is why we will be ones to feature heaters that qualify for higher energy efficiency standards.

Hearthstone Bari Plus 8172 wood stove eligible for 2021 25d US Federal tax credit

What do you have to keep on record to claim the Tax Credit?

You should keep the sales receipt and any installation paperwork and the heater certificate from the manufacturer.

The We Love Fire Partner Store from whom you purchased the qualifying heater will provide you with a manufacturer's certification statement indicating that the product qualifies for the tax credit. You aren't required to have a manufacturer's certification statement in order to claim the tax credit. A screenshot or printout of the product manual page listing the energy efficiency as at least 75 percent efficient per the HHV is sufficient. Here’s an example of a Certificate.

How Do You Claim Your Federal Tax Credit?

You claim the 26% tax credit on your federal income tax return form, starting on the 2021 tax return. The credit is a reduction of the total income tax owed. This is a non-refundable tax credit available for individuals who pay federal taxes.

If your tax owed is reduced to zero by this credit, but you still have money left to claim, it can be carried over to the next tax year to further reduce your tax burden in the future.

You should always consult a tax professional as individual situations may vary.

Paper Filing: The credit can be claimed on IRS Form 5695 under Residential Energy Efficient Property Credit. If you are eligible to claim the tax credit, the amount has to be entered on line 5 of tax form 5695. Biomass is specifically mentioned on the form and on its own line. The credit may be claimed in the year in which a qualifying product is installed. So, if your stove or fireplace is purchased in 2021 but not installed until 2022, you will then claim the credit on your 2022 tax return.

Electronic Filing: If you are using tax filing software, the credit generally will be found under the "Credits" section of the Federal portion (Home Ownership – Residential Energy Credit).

If you made a qualifying purchase and installation in a previous tax year and want to claim the credit this year, you need to file an amended return using IRS Form 1040-X.

Hearthstone Manchester wood stove eligible for 2021 25d US Federal tax credit

Where can the qualified heater be installed?

It may be installed in your primary home, secondary home, vacation home, a new or existing home. The only restriction is that the property where it is installed cannot be an investment property such as a rental home.

There is no stated limit from the IRS as to how many qualified heaters you may buy and claim the stove Tax Return for.

It is always best advised to talk to your Tax Advisor.

What are the We Love Fire favorites on the Tax Credit Qualified Heaters?

We have 3 brands that we love who qualify. Hearthstone, Ambiance and Napoleon. To see the models that qualify, use the table below.

BRAND MODEL EFFICIENCY
Ambiance Hipster 14 79%
Ambiance Hipster 20 79%
Hearthstone Green Mountain 40 79%
Hearthstone Green Mountain 60 79%
Hearthstone Green Mountain 80 81%
Hearthstone Castleton 77%
Hearthstone Manchester 78%
Hearthstone Craftsbury 79%
Hearthstone Shelburne 79%
Hearthstone Heritage 77%
Hearthstone Bari 76%
Hearthstone Bari Plus 76%
Napoleon S30 75%

Do you have any question on the Federal Tax Credit?

We are here to help! Send us a message or reach out to your local We Love Fire store.

 

*What is the HHV Efficiency? The Higher Heating Value refers to the ‘value’ of heat available from the fuel. In the case of wood, one pound of wood as found in firewood will generate about 8500 BTU on average.

The opposite of HHV is LHV, or Lower Heating Value. If we were able to remove all moisture content from the wood, one pound of it would be a larger piece, thus generating more BTU. The LHV efficiency calculation removes the ‘water’ or moisture from the wood to find the net (or lower) value of heat from the wood itself.

The HHV efficiency takes the piece of wood including its ‘water’ or moisture, as found in real life to calculate its ‘real’ or higher heating value. The HHV calculation is more representative of the firewood used by homeowners when heating with wood. That is why the EPA and IRS are both using this method as the official way to measure efficiency on wood and pellet stoves.

Text of the House Amendment that includes the SEC 25 (D) on page 2449 of the pdf: https://docs.house.gov/billsthisweek/20201221/BILLS-116HR133SA-RCP-116-68.pdf

Below is a list of fireplace and grill stores that service Virginia (VA)

Manassas, VA

Winston's Chimney Service
11301 Industrial Road
Manassas, VA 20109

Mechanicsville, VA

Hearth & Home Shoppe
8151 Mechanicsville Tpk
Mechanicsville, VA 23111

Visit Store Page

Roanoke, VA

Dixie Building Products Inc.
3342 Melrose Ave NW
Roanoke, VA 24017


For more information, contact your local fireplace and grill store..

45 Responses

  1. Mike
    Can you confirm that a high efficiency fireplace which meets the output and LHV parameters would qualify? Or are fireplaces not eligible whatsoever? For example: RSF Opel 3 Plus: 80% LHV with .7 g/hr output. It is not listed in the EPA site however.
    • Dominique Page
      Hello Mike Thanks for reaching out. The 75% efficiency threshold being used for the Tax Credit is using the HHV calculation, not LHV. I looked at the Opel 3, and it has 70% LHV efficiency. So it does not qualify for the Tax Credit. If a model is not found on the EPA registry, it means it is not EPA certified. Dominique
    • Teresa
      I would like to know where I go to to see if my pellet stove qualifies for the tax credit Thanks so Much
      • Dominique Page
        Hello Teresa. Thanks for reaching out. To find out if your pellet stove qualifies for the Tax Credit, you may go on the EPA website. Select the fuel as 'pellet' when you filter the search. If your stove is listed with an efficiency higher than 75%, it will qualify for the 26% tax credit. All the best! Dominique
  2. Gloria
    Why are some pellet and wood burning stoves with less than 70% HHV listed in the EPA listing for tax credits?
    • Dominique Page
      Hi Gloria Thanks for reaching out. All EPA certified stoves are listed on the EPA registry, regardless of their efficiency. Some are as low as 60% efficient, but they meet the low emission requirement as set by the EPA. So they are EPA certified. The IRS Tax Credit applies to stoves that are EPA certified and boasting an HHV efficiency higher than 75%. Hope this answers your question. Dominique
  3. Dave
    If you are installing the stove yourself, how do you estimate the labor cost so you can take full advantage of the credit? Also, would the non combustible wall coverings that are used behind the stove be something that could be included in the installation cost (i.e. concrete board and stone)?
    • Dominique Page
      Hello Dave Thanks for reaching out. Everything required to do the install qualifies for the tax credit. As per labor, if there is no invoice from a contractor, you cannot claim it. From the eyes of the IRS, if labor was free, you cannot claim 26% on something that was free...:) Dominique
  4. Nikki
    If I purchase and have installed a wood stove which does not qualify for the tax reduction at the time, but subsequently does, can I claim it the following year? The company is actively working to increase that 74.2 ...
    • Dominique Page
      Hello Nikki Thanks for reaching out. In order to claim the tax credit, the manufacturer needs to provide you with the certificate stating it is above 75% efficiency. Now, if the manufacturer is re-testing its stove in order to exceed the 75% mark, changes they will make will only apply to future productions. That would mean your stove is still 74.2% and still does not qualify for the tax credit. If the IRS were to investigate, you are the one who is liable. I would not take on that risk if it were me. The IRS has set clear rules as to what they sponsor with the Tax Credit. I recommend following these rules. Dominique
  5. Thomas
    I'm retired and live on social security and haven't filed taxes for years how can I get a rebate y stove is 84 percent efficient
    • Dominique Page
      Hi Thomas Thanks for reaching out. My understanding is the tax credit is deducted from taxes paid. You might want to double check it with a local accountant, just in case. All the best! Dominique
      • Tawnika
        If I bought a stove that qualifies, but can't get piping to get it installed this year, what are my options? Will the tax credit be good next year? Can I claim the price of the stove next year, if it isn't installed until then? Also, can I install it myself?
        • Dominique Page
          Hello Tawnika. Yes, you can install yourself. Dominique
  6. Tawnika
    If I bought a stove that qualifies, but can't get piping to get it installed this year, what are my options? Will the tax credit be good next year? Can I claim the price of the stove next year, if it isn't installed until then? Also, can I install it myself?
    • Dominique Page
      Hello Tawnika Thanks for reaching out. I don't where you are located, but I am pretty sure there is 'pipe' to be found to do the install. How about you check with our most local expert? If you have to postpone the install to next year, you will be able to claim it for next year's return. I would suggest you reach out to a tax advisor to confirm everything. All the best! Dominique
      • Andrew
        I'm doing new construction and wife wants a fireplace look. I want the tax credit. No zero clearance fireplaces qualify. I'm considering a qualifying insert like the Hearthstone Clydesdale ( but it's not out yet?) and building a firebox around it. Looking for large viewing window and to avoid building full masonry chimney etc. Please advise.
        • Dominique Page
          Hello Andrew Thanks for reaching out. You are correct, there are no tax credit approved zero-clearance wood fireplaces. I would invite to consider the Ambiance Elegance Series. The pricing is very reasonable, with soapstone inside the box, and a clean look. We consider it as being the best option out there. Building a firebox around an insert will end up being complicated and very expensive.
  7. Emma
    If you purchase a qualifying stove 2nd and and install it yourself, are you still eligible for the tax rebate?
    • Dominique Page
      Hello Emma. Thanks for reaching out. To claim the tax credit, the stove has to be 75% HHV efficiency or higher and has to be listed as such on the EPA woodstove registry. You will also need the invoice to file with your tax return. I would suggest you talk to your tax advisor if you have one to confirm everything.
  8. Andrew
    Do you know of any large wood stove inserts that qualify? Most of the larger inserts are just below the 75% efficiency from what I see. We are looking at the Regency Pro-Series Ci2700, but it has a 74% HHV efficiency. I tried to look on the EPA site you recommended, but there is no way to search inserts but just throws all the wood stoves together. Thanks for any information you have.
    • Dominique Page
      Good morning Andrew. Thanks for reaching out. On the EPA registry, an insert is listed as a stove. This is not practical when the time comes to run a search. From the partners we work with at the moment, there are no large wood insert qualifying for the tax credit. You may want to reach out to our most local store. Maybe they have access to other brands as well. Dominique
  9. jeff brining
    Hi Dominique, can you tell me if the Lipo Rockport hybrid qualifies. Thank you Jeff
    • Dominique Page
      Hi Jeff. Thanks for reaching out. Yes, the Lopi Rockport Hybrid qualifies for the Tax Credit. It is showing on the EPA woodstove registry with an efficiency greater than 75%. All the best! Dominique
  10. mark
    do any of the lopi wood inserts qualify for tax credit in 2022 and 2023 ? thank you
    • Dominique Page
      Hello Mark. Thanks for reaching out. If you look at the EPA registry, we can see two Lopi inserts that qualify. The Large and medium Hybrid Fyre Inserts. The others are not listed as of today. Hope this helps. Stay warm! Dominique
  11. Jim Hawthorne
    We installed a qualifying stove in a vacation cabin. Your article asks the question: WHERE CAN THE QUALIFIED HEATER BE INSTALLED? Your answer: It may be installed in your primary home, secondary home, vacation home, a new or existing home. The only restriction is that the property where it is installed cannot be an investment property such as a rental home. Line 17a of Form 5695 asks "Were the qualified energy efficiency improvements or residential energy property costs for you main home located in the United States?" Elsewhere the instructions state that "main home" is where you reside most the time. Does this mean I cannot use the credit for a wood stove in our vacation cabin? Thanks for any information you have about this.
    • Dominique Page
      Hello Jim. thank for reaching out. The Tax Credit can be claimed for a vacation home. You need to talk to your tax advisor to confirm how to enter it on the form. You may want to look at this document from the IRS, on page 3. Section 25'd' allows for the Tax Credit on wood stoves (as they are not listed in the exclusions, like solar) I hope that answers your question.
  12. Deb
    Just found out that they did away with the 26% uncapped tax credit for pellet stoves. But they continue to have it on site. So disheartening.
    • Dominique Page
      Hi Deb. Thanks for reaching out. I don't know where you got that information. But I can tell for sure, the tax credit is in full swing. It is effective for all of 2023 and beyond.
  13. stephen solano
    changing wood burning fireplace to gas burning vented, can i get the tax credit?
    • Dominique Page
      Hi Stephen Thanks for reaching out. The answer is no. The Tax Credit is for Biomass heating equipment, such as wood pellet and fire wood. It does not apply to fossil fuels.
  14. Sandy
    Is the cost of buying the biomass fuel (wood pellets) deductible each year somewhere on federal filing?
    • Dominique Page
      The Tax Credit can only be claimed once, per stove.
  15. Doug Walsh
    I did not know that the tax credit is only allowed on your primary residence
  16. JOE
    Hi Dominique, How does this TAX CREDIT WORK, if I have had an unusual past year And I'm getting a rebate for 2021? Is there a way to still get it for somehow? When I bought the stove they only stated it qualifies for the 26% rebate, that' s a big reason I bought the stove, I did for getting back against the price I paid, close to $5K, so I was expecting almost an additional ~$1.5K on my Tax return. Now I'm finding out from your responses, the credit only goes against if I owed money on my Tax return? This was NOT ever mentioned during my purchasing of the wood burning Stove, which is listed and I have a certificate, that it qualifies for this Rebate. Could you please give me some guidance on What can be done???
    • Dominique Page
      Hi Joe the best would be to talk to your tax attorney or advisor. We don't have access to individual's tax returns and cannot comment on that. Dominique
  17. Dick Lowman
    Our tax advisor told us that we can only claim credit if the new stove replaces an older less efficient unit. Where can I find if this is true in the tax code?
    • Dominique Page
      That is a good question. Here's the link to the IRS guidance document. It clearly states that the 25(d) Tax Credit applies to new construction homes and existing homes being improved. So the new stove does not need to replace an older one. Hope that answers your question.
  18. Daniel
    If I have a secondary wood pellet storage bin installed outside my home in addition to a new pellet boiler that does qualify for the federal tax credit, would the cost of installing the secondary storage bin qualify for the tax credit as well? Thanks
    • Dominique Page
      Hi Daniel. Thanks for reaching out. The answer is yes, if installed at the same time as the pellet stove that qualifies.
  19. These tips have helped me immensely in my goal to sell my house and I just wish that I knew about these tips before. I absolutely love the content.
    • Dominique Page
      Thanks so much!
  20. […] whole life, or you just recently purchased a new and efficient wood stove to take advantage of the 26% Wood & Pellet Tax Credit we want to share with you some tips so you can get the most out of your wood-burning […]
  21. I belong to an LLC with 4 other members. We own a cabin in northern Wisconsin. We are planning on installing a new high efficiency wood stove along with new piping. Would we qualify for the 26% rebate? Could we have one member purchase it and have them apply for tax credit?
    • Dominique Page
      Hello Paul Thanks for reaching out. The very best would be to double check with your accountant. I am not sure the Tax Credit can be claimed for a LLC.

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