A New Federal Tax Credit for Efficient Wood & Pellet Heating Appliances

Legislation became effective Jan 1, 2021 that created a new federal tax credit under Sec. 25(D) of the Internal Revenue Code. This new federal tax credit covers 26 percent of purchase AND installation costs (with no limit) on new wood and pellet heating appliances.

Fireplace; View stoves that qualify for up to an additional $2,500 rebate

What Qualifies

  • Must be purchased and installed between January 1, 2021 and December 31, 2022 in a new or existing home (can be a primary or secondary home). The program continues in 2023, however the tax credit decreases from 26% to 22%.
  • The stove or insert must burn biomass (wood or pellets) as a fuel and is at least 75 percent efficient per the higher heating value (HHV) of the fuel.
  • Both purchase and installation costs (venting and related materials; onsite labor) can be included in your total cost.

Qualifying Pellet Stoves

Qualifying Pellet Inserts

Qualifying Wood Stoves

Paperwork You Should Keep for Your Tax Records

  • Purchase receipt, including cost of product and installation.
  • The manufacturer certificate stating that the stove qualifies for the credit and is at least 75% efficient HHV.

How to Claim the Sec. 25(D) Federal Tax Credit

  • Claim the credit on your federal income tax form.
  • File Via Tax Software: Generally located in the “credits” section of the Federal portion under home ownership and residential energy credit. File Via U.S. Mail: The IRS has not yet updated their forms for 2021 and likely won’t do this until early 2021. This credit would be claimed on IRS form 5695 under “Residential Energy Efficient Property Credit.”
  • Please consult your tax advisor for more information or any tax-related questions.