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Wed, May 15, 2024

Get tax credit for adding energy efficiency

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.

Author: Copperfield Chimney Supply

Wed, May 15, 2024

Maryland to give rebates for wood and pellet st...

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.

Author: Copperfield Chimney Supply

Wed, May 15, 2024

2011 Federal Biomass / Woodstove Tax Credit

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.

Author: Rick Eudaley, Copperfield Chimney Supply Inc.

Wed, May 15, 2024

Tax Credit Extended for Biomass Stove Purchase

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.

Author: Rick Eudaley, Copperfield Chimney Supply Inc.

Wed, May 15, 2024

$300 Biomass Stove Tax Credit Reinstated for 20...

A federal tax credit on 75 percent efficient biomass heating appliances, which expired on December 31, 2011, was reinstated by the "fiscal cliff" legislation, the American Taxpayer Relief Act of 2012 (H.R. 8), signed by President Obama on January 2, 2013. The bill includes a "tax extender" for Internal Revenue Service Section 25C which provides a tax credit for, among many other things, qualifying biomass burning stoves.
The extender provides a 10 percent tax credit of up to $300 on a qualifying biomass heating appliance purchased between January 1, 2012 and December 31, 2013. The credit claimable on the purchase or installation of qualifying biomass units is limited to a "lifetime limit" of $500 (and may be impacted by the purchase or installation of other products that qualify of a 25C credit).
HISTORY OF AND BACKGROUND ON THE BIOMASS STOVE TAX CREDIT
2008 - At the end of 2008, in the last days of the 110 th Congress, HPBA succeeded in having inserted, in a major financial bailout measure, language that provided a 10% tax credit (up to $300) for consumers who purchased a 75% efficient stove "which uses the burning of biomass fuel to heat a dwelling unit…or to heat hot water for use in such a dwelling unit." A definition of biomass fuel was also included in the language of the bill.
The concept of using the lower heating value (LHV) method, and not the higher heating value (HHV) method, to measure efficiency was not mentioned in the final language of that legislation (H.R. 1424 - Public Law No. 110-343). After passage, a determination was made that without language indicating whether to use HHV or LHV, there would be major confusion among manufacturers about which method (and therefore which efficiency number) to use. Such manufacturer confusion would translate into marketplace (i.e., consumer) confusion.
Following enactment of the 10% tax credit measure, discussions began within HPBA on the fact that using the HHV method (vs. LHV) to determine efficiency would severely reduce the number of units that would qualify for the tax credit.
An effort was immediately begun to get enacted language to specifically list LHV as the efficiency measuring method.
2009 - In early 2009, the new Obama Administration and the new 111 th Congress proposed the massive stimulus package, The American Recovery and Reinvestment Act (ARRA) of 2009. Working with our allies in the Congress, HPBA was able to get language inserted into the ARRA draft language that expanded the 2008-passed tax credit to become a 2-year credit with the same requirements (75% efficiency), but with a much-increased value for the tax credit (30%, up to $1500). Lastly, and very importantly, HPBA was able to get language inserted that requires the use of "a thermal efficiency rating of at least 75 % as measured using a lower heating value." The LHV language was key to ensuring that the biomass-burning stove tax credit would be a success.
2010/2011 - The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act TRUIRJCA of 2010, passed at the end of 2010, took the numbers of the biomass-burning stove tax credit back to its pre-2009 levels:
  • 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.
In the weeks leading up to Congress' vote on the tax package, HPBA reached out to congressional leaders to remind them of the importance of this tax credit not only to the hearth industry but to consumers interested in purchasing biomass heating systems. HPBA had been working closely with Senator Susan Collins (R-ME) to ensure that biomass tax credit language was contained in the bill, and we are appreciative of the efforts she put forth in achieving its inclusion. Of particular note is Sen. Collins' inclusion of language in the Congressional Record (the official transcript of the United States Congress) that directs the IRS to continue to use the lower heating value as the operative efficiency methodology in determining which appliance qualifies for the tax credit. A portion of her remarks stated:

"The IRS has issued guidance directing that the 'lower heating value' methodology should be used, which is consistent with industry practices and with our intent to ensure that the credit is available for efficient and clean-burning wood and wood-pellet stoves. Removing the reference to the 'lower heating value' from the Code serves little purpose. Certainly, however, it does not mean that this common-sense methodology is precluded, nor does it require the IRS to revisit its methodology. I hope that my comments today will help avoid confusion about the use of the 'lower heating value' methodology with respect to this tax credit."
(Congressional Record, December 15, 2010; Statement by Senator Susan M. Collins; H.R. 4853, Middle Class Tax Relief Act of 2010)
Comments place in the Congressional Record have no authority to direct or alter regulations or legislation, but they do have the power to suggest how bureaucrats might want to interpret congressional actions. With this in mind, and without any absolute indication to the contrary, HPBA is continuing to suggest that the 75% efficiency level still applies. And, although the very important LHV measurement language has been deleted, we believe (but do not yet know for certain) that the IRS will continue to follow the precedent set by the prior tax credit and allow the use of the LHV measurement to determine efficiency. We are in the process of asking the committees of jurisdiction in the new 112 th Congress for a more detailed explanation of why LHV was removed from the tax code, and what we can do to get it permanently returned to the code.
2012/2013 - On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012 (H.R.8) which extended the 2010/2011 tax credit for 2012/2013
Lifetime Limitation - The tax code is famous for its "lifetime limitation" language and this tax credit is no different. As with historical tax credits available to the industry, rather than attempting to explain the complicated details of lifetime limitations, HPBA prefers to say, "PLEASE CONSULT YOUR TAX ADVISOR FOR DETAILS OF HOW THIS WILL AFFECT YOU" in all of our comments, both written and oral, about this credit.
Tax Credit FAQs
  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?
This federal tax credit encourages people to make energy-conscious purchases that improve the energy efficiency of their home. It is an up to $300 credit you can get for buying a qualifying biomass-burning stove or fireplace insert between January 1, 2012 and December 31, 2013. Biomass simply means the stove uses wood or pellet fuel .
Consumers claim the credit on their federal income tax form at the end of the year. This new credit reduces the amount of tax you owe. The new credit is a reduction of total income tax at the bottom of your return, up to $1500. This tax credit is a non-refundable tax credit available for individuals who pay taxes and who make energy-conscious purchases to improve the energy efficiency of their home.
Note: With regard to tax credits vs. tax deductions, in general, a tax credit is more valuable than a similar tax deduction. A tax credit reduces the tax you pay, dollar-for-dollar. Tax deductions - such as those for home mortgages and charitable giving - lower your taxable income.
  • What is the difference between a tax deduction and a tax credit?
As previously stated, a deduction is an expense or amount you can subtract from your taxable income. A tax credit lowers your actual tax bill dollar-for-dollar, in this case by up to $1,500. In general, a tax credit is more valuable than a similar tax deduction.
  • What is the difference between a non-refundable tax credit and refundable tax credit?
A non-refundable tax credit (such as this one) is a tax credit that is applied to the amount of tax owed by the taxpayer after all deductions are made from his or her taxable income. Typically, a tax credit only reduces an individual's tax liability to zero. Refundable credits can be considered the same as a payment, with no limit to the amount a taxpayer can receive. A refundable tax credit is a tax credit that is not limited by the amount of an individual's tax liability.
  • When does this tax credit go into effect and how long will it last?
The tax credit went into effect January 1, 2009 and is valid only for the purchase of a qualifying biomass stove during 2009 and 2010. The maximum tax credit for the two-year period is $1500. The sales receipt must indicate that the purchase was made between January 1, 2009 and December 31, 2010.
  • How is the value of this tax credit determined?
When you buy a qualifying biomass-burning appliance between January 1, 2009 and December 31, 2010, you get a tax credit of 30% of the total price, up to $1,500 dollars. So, for example, if your wood or pellet stove cost $5,000 (which can include installation), you can deduct $1,500 from the taxes you owe the government.
  • What appliances qualify for the tax credit?
Any wood- or pellet-burning stove that meets the 75% efficiency rating qualifies for this credit.
Manufacturers test their products to certify they meet this efficiency standard and the IRS-required certification will come with the product straight from the appliance manufacturer. Visit your local specialty retailer who can explain which products they have will qualify for the tax credit.
  • Why was 75% efficiency selected?
The 75% efficiency was designated by the U.S. Congress in 2005 as part of the Energy Policy Act and was used again for this tax credit. Are biomass stoves installed in new or vacation homes covered by this tax credit?
  • How is the 75% efficiency requirement determined?
The manufacturer of the stove must provide certification that the product tests for at least a 75% efficiency rating using the lower heating value, i.e., the heat value of a combustion process assuming that none of the water vapor resulting from the process is condensed out, so that its latent heat is not available.
  • Are biomass stoves installed in new or vacation homes covered by this tax credit?
No. The credit only applies to your existing principal residence. New homes and vacation homes don't qualify, nor do homes owned as rental units. The IRS is very clear that this credit applies only to existing principal residences, thus new homes and vacation homes would not qualify, nor would homes owned as rental units.
  • What is meant by "renewable biomass?"
For the purposes of this tax credit, the term 'renewable biomass' means any of the following:
(A) Materials, pre-commercial thinnings, or removed invasive species from National Forest System land and public lands, including those that are byproducts of preventive treatments (such as trees, wood, brush, thinnings, chips, and slash), that are removed as part of a federally recognized timber sale, or that are removed to reduce hazardous fuels, to reduce or contain disease or insect infestation, or to restore ecosystem health, and that are harvested in environmentally sustainable quantities, as determined by the appropriate federal land manager; and harvested in accordance with federal and state law, and applicable land management plans.
(B) Any organic matter that is available on a renewable or recurring basis from non-federal land or land belonging to an Indian or Indian Tribe that is held in trust by the United States, including renewable plant material like feed grains; other agricultural commodities; other plants and trees; and algae; and waste material, including crop residue; other vegetative waste material (including wood waste and wood residues); animal waste and byproducts (including fats, oils, greases, and manure); construction waste; and food waste and yard waste.
(C) Residues and byproducts from wood, pulp, or paper products facilities.
  • What is the definition of a "Wood Burning Furnace?"
A wood burning furnace is a simply a furnace type that uses wood as its primary fuel source. In some cases, a wood furnace can simply use radiant heat in order to control environmental conditions in the home, or it can be a forced-air furnace. Forced-air furnaces force air into the furnace, heat it up, and then force the heated air into the ducts for distribution throughout the home. This is also known as central heating. In a sense, a fireplace can also be considered 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?
The IRS did not state that inserts are covered, or are not covered. However, based on EPA's practice of treating inserts and freestanding biomass stoves in a similar fashion, manufacturers may choose to include inserts. At this time (June 2009) it is not clear whether EPA-certified wood-burning fireplaces or hydronic heaters will qualify.
  • 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?
The tax credit is an aggregate, meaning the 2-year $1500 total credit can be used for items other than biomass stoves, such as windows and doors, HVAC and non-solar water heater upgrades, and roof upgrades, all of which are in the same tax credit category as biomass stoves. The tax credit for all of these upgrades is capped at $1500 for the two year period. For example, if a taxpayer uses the entire $1500 for a product in 2009, then they cannot use it in 2010 for any other product in that same tax credit category.
  • How do I ensure that I can collect on my tax credit?
Save your receipt that proves you purchased the qualifying appliance between January 1, 2009 and December 31, 2010. You'll also need a manufacturer's certification statement that states your product meets the 75% efficiency rating needed to qualify for this tax credit.
A manufacturer's certification statement must contain the following information:
  • 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."
These documents don't need to be attached to your tax return, but you should keep them for your records.
  • What should a retailer provide and the customer retain for tax purposes?
Retailers and consumers must keep exact records of any sale or purchase. Retailers should provide a consumer with the manufacturer's certification statement for the specific product model purchased. A consumer may rely on a manufacturer's certification statement that their products are qualified energy property. A taxpayer is not required to attach the certification statement to the return on which the credit is claimed. A consumer claiming a credit for qualified energy property should retain the certification statement as part of the taxpayer's records. Manufacturers should make this certification document available to consumers on the web, in the product packaging, or in some other easily accessible manner.
  • Are installation costs included in this tax credit?
Yes. Installation costs are included as long as professional installation is required for the proper and safe operation of the stove. The IRS is silent on the possible need to replace a chimney when upgrading an existing biomass stove; however, the EPA has a section on its website titled, Installation Affects Efficiency , which retailers and consumers should consult when deciding if a chimney replacement is warranted when installing a biomass stove.
  • Does the stove need to be manufactured in the U.S. to qualify for the credit?
No. There is no "Buy America" component to this tax credit.
  • Where can I find more information about this tax credit?

Author: Copperfield Chimney Supply