If you’re considering a home-improvement project that will cut energy costs, it’s not too late to take advantage of special federal tax credits. But be aware that time is running out.

The residential energy-efficiency tax credit had been set to expire at the end of 2011. But early this year, as part of the “fiscal cliff” deal, Congress extended it to include projects undertaken during tax years 2012 and 2013.

To qualify for the tax credits – which reimburse homeowners 10 percent of the cost of an Energy Star-qualifying home-improvement project, up to $500 – the improvement must have been made in 2012 or 2013.

Here’s a list of products and appliances that may qualify for a tax credit, but keep in mind that the total credit can’t exceed $500:

• Insulation or insulating material, 10 percent of cost.

• Exterior window or skylight, 10 percent of cost, up to $200.

• Exterior door, 10 percent of cost.

• Metal roof with pigmented coating, or asphalt roof with cooling granules, 10 percent of the cost.

• Advanced main air-circulating fan, $50.

• Natural gas, propane, or oil furnace or hot water boiler, $150.

• Electric heat pump water heater, $300.

• Electric heat pump, $300.

• Central air conditioner, $300.

• Natural gas, propane, or oil water heater, $300.

• Biomass stove, $300.

Here are basic facts about the tax credit:

Taxpayers who took advantage of the full original tax credits from 2006 to 2011 are not eligible for the entire credit. However, if you only used $200 of the credit during that time period, you would still be eligible for $300 this time around.

In order to receive the tax credit for various home-improvement projects, the work must have been done in 2013 and it must be claimed on the 2013 federal income tax form, which is due to be filed by April 15, 2014.

To take advantage of the credits, fill out IRS Form 5695 and provide a copy of the Manufacturer’s Certification Statement, along with a receipt. Your service provider should be able to help you with the certification statement.

To qualify for the credit, the energy-efficient product must be installed in the taxpayer’s primary, owned residence, and must have an expected life span of at least five years. Usually, labor costs don’t count toward tax-credit eligibility.

Also, each improvement must meet government energy-efficiency ratings. For example, a natural gas, propane or oil water heater must have an “energy factor” of at least 0.82 or a thermal-efficiency rating of at least 90 percent. A biomass stove, meanwhile, would need a thermal-efficiency rating of at least 75 percent. For more information, visit energystar.gov.

Maryland to Give Rebates for Wood & Pellet Stoves

The Maryland Energy Administration (MEA) is starting a $50,000 pilot program that will provide rebates for partial payment of qualifying wood and pellet stoves. The pilot program will start later this year and operate on a first come, first serve basis.
“This program will extend our renewable energy incentives both to a different technology and to a potentially a diverse group of participants including those in rural parts of Maryland,” said Frederick Hoover, Director of Clean Energy at MEA in a letter to Delegate Heather Mizeur. The Maryland delegate was the lead sponsor of the bill HB 996, the Renewable Energy for All Act, which laid the groundwork for this pilot program.
“We are thrilled that the cleanest wood and pellet stoves will finally be part of Maryland’s renewable energy rebate program,” said John Ackerly, President of the Maryland based non-profit, the Alliance for Green Heat. “Throughout the US, rural low and middle-income families struggle to pay their heating bills while generous rebates and tax-incentives flowed to some of our wealthiest citizens to install solar panels. A $3,000 pellet stove can displace as much fossil fuel as a $30,000 array of solar panels,” Ackerly explained.

The Alliance for Green Heat led a coalition of Maryland organizations, businesses and consumers during the two-year push to establish this program. The program was supported by the Maryland Clean Energy Center, the Chesapeake Climate Action Network, the Metropolitan Washington Council of Governments, the Mid Atlantic Hearth Patio& Barbecue Association and many other groups. Hearth retailers in the state, led by Richard Thomas of Courtland Hardware and Suzanne Turner of Survival Products also campaigned for the program. The coalition was especially trying to help rural Maryland residents who do not have access to natural gas and heat with the most expensive fossil fuels: oil, propane and electricity.
“At a time when millions of Americans are out of work and struggling to pay bills, this is a way to help families affordably heat their homes and switch to a renewable, local energy source,” Ackerly said.
Delegate Heather Mizeur, who represents Maryland District 20 that shares a border with Washington, DC, included this message to her constituents:

“While grant programs help Marylanders purchase solar, wind, and geothermal energy systems, the cost of these systems is out of reach for most families. The Renewable Energy for All Act would incentivize the purchase of biomass systems that generate heat energy via wood and corn pellet products, helping families switch to a less expensive heat source and participate in our clean energy future. … Homeowners with less efficient stoves could also receive a $200 change-out grant to replace their old stove with a more efficient, cleaner burning unit.”

During negotiations with the Maryland Energy Administration HB 996 was amended to focus on a pilot program with MEA funding. The House committee of jurisdiction voted against the amended bill, but MEA has reaffirmed their commitment to undertake the program.

The government has extended the Tax Credit in 2011, but the amount of credit is much lower, changing to 10% of the price of the appliance only, not including labor, up to $300.

The qualifications are:

• The credit is for biomass heating appliances: pellet stoves, pellet inserts, wood-burning heating stoves, and woodburning fireplace inserts. • The appliance must be installed in an existing primary residence, not a new house or rental property. • The stove or insert must have a minimum efficiency rating of 75% as certified by the manufacturer. • The appliance must be an EPA approved biomass stove.

Homeowners should keep the manufacturer's certificate and invoice from the installer to give to their accountant and keep for their records, but do not need to file these items with their tax forms. A copy of the certificate can usually be obtained from the manufacturer's website. This credit reduces the amount of tax you owe for 2011 dollar for dollar. The credit is a reduction of total income tax at the bottom of your return, up to $300. Consult your tax accountant for details.

Update from HPBA (Hearth, Patio and Barbeque Association)

On December 17, 2010, President Obama signed a bill that extended many of the consumer tax credits into 2011 to help boost the slowly recovering economy. The tax credit for the purchase of a biomass-burning stove was extended, but with additional restrictions. The tax credit for 2011 is structured as follows: 1) a 10% tax credit, capped at $300, for a 75% efficient biomass stove; 2) the lower heating value (LHV) efficiency measure was removed; 3) the credit applies to purchase price only, not installation; and 4) tax credit is for 2011 only. HPBA encourages all members to check with their tax advisors for further clarity.

HPBA continues to work with the new Congress on this credit and other important issues.

• Tax credit of 10% of purchase price (not to include installation), up to a maximum credit of $300
• Applicable for purchases in 2011 only
• Kept the 75% efficiency level because it referenced the prior credit and did not explicitly (or implicitly) remove the 75% number
• Explicitly removed the Low Heating Value (LHV) testing methodology from TRUIRJCA at Sec. 710(b)(2)(B) but did not mention any substitute method.

1. What is the Biomass-Burning Stove Tax Credit?
2. What is the difference between a tax deduction and a tax credit?
3. What is the difference between a non-refundable tax credit and refundable tax credit?
4. When does this tax credit go into effect and how long will it last?
5. How is the value of this tax credit determined?
6. What appliances qualify for the tax credit?
7. Why was 75% efficiency selected?
8. How is the 75% efficiency requirement determined?
9. Are biomass stoves installed in new or vacation homes covered by this tax credit?
10. What is meant by "renewable biomass?"
11. What is the definition of a "Wood Burning Furnace?"
12. If a consumer purchases other products, such as solar collectors or window upgrades, does this mean a biomass stove tax credit can't be taken?
13. Will other wood and solid-fuel appliances (like inserts, EPA-certified wood-burning fireplaces and hydronic heaters) qualify for the tax credit?
14. How do I ensure that I can collect on my tax credit?
15. What should a retailer provide and the customer retain for tax purposes?
16. Are installation costs included in this tax credit?
17. Does the stove need to be manufactured in the U.S. to qualify for the credit?
18. Where can I find more information about this tax credit?

• What is the Biomass-Burning Stove Tax Credit?

• What is the difference between a tax deduction and a tax credit?

• What is the difference between a non-refundable tax credit and refundable tax credit?

• When does this tax credit go into effect and how long will it last?

• How is the value of this tax credit determined?

• What appliances qualify for the tax credit?

• Why was 75% efficiency selected?

• How is the 75% efficiency requirement determined?

• Are biomass stoves installed in new or vacation homes covered by this tax credit?

• What is meant by "renewable biomass?"

• What is the definition of a "Wood Burning Furnace?"

• Will other wood and solid-fuel appliances (like inserts, EPA-certified wood-burning fireplaces and hydronic heaters) qualify for the tax credit?

• If a consumer purchases other products, such as solar collectors or window upgrades, does this mean a biomass stove tax credit can't be taken?

• How do I ensure that I can collect on my tax credit?

• The name and address of the manufacturer.
• Identification of the class of qualified energy property (Biomass-Burning Stove) in which the property is included.
• The make, model number and any other appropriate identifiers of the stove.
• A statement that the product is an eligible qualified energy property.
• A manufacturer's certification statement must contain a declaration, signed by a person currently authorized to bind the manufacturer in these matters, in the following form: "Under penalties of perjury, I declare that I have examined this certification statement, and to the best of my knowledge and belief, the facts are true, correct, and complete."

• What should a retailer provide and the customer retain for tax purposes?

• Are installation costs included in this tax credit?

• Does the stove need to be manufactured in the U.S. to qualify for the credit?

• Where can I find more information about this tax credit?