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January 1, 2013: Wood Still Good, says the Fed
As part of the fiscal cliff package that passed Congress on January 1, 2013, the expired 2011 tax credit for energy efficient biomass-burning
appliances was reinstated for 2013. The package provides a 10 percent tax credit, up to $300 in value, on the purchase of a qualifying wood or
pellet-burning product. The tax credit is subject to a $500 lifetime limit and applies retroactively to appliances purchased between January 1,
2012 and December 31, 2012.
2012 - 2013 Biomass Tax Credit Extension FAQ's
Q: How does the new 2013 extension of the Recovery Act affect the purchase of wood stoves?
A: If you purchased and installed a new, qualifying biomass (wood or pellet) stove between January 1, 2012 and December 31, 2012, you can take a
credit against your 2012 taxes totalling 10% of the purchase price, up to $3000 (maximum credit $300). The credit can also be taken on your 2013
tax return, for qualifying biomass products purchased between January 1, 2013 and December 31, 2013.
Q: So, what does it take for a stove to qualify?
A: The stove must be new, must burn biomass fuel, must achieve a thermal efficiency rating of 75% or greater, and must be purchased and put into
service by Decemer 31, 2013.
Q: Could I buy more than one stove and get a 10% credit for each of them on this program?
A: Yes, if all are installed in your principal residence, up to the credit ceiling of $300.
Q: So, I could buy new stoves for the new house I'm building, my summer cabin and my rental house for a total of up to $3000, and get a 10% credit
(up to $300) for the total?
A: Nope, the credit only applies to stoves installed in existing principal residences. Your new house, summer cabin and rental don't qualify.
Q: Does this program apply only to wood stoves?
A: The 10% tax credit also applies to other biomass appliances, such as pellet and corn stoves, as long as they achieve at least 75% thermal
efficiency. For more information, click here.
Q: What if I spend $4,000 on my new stove? 10% would be $400. Would I get the $400?
A: Nope, the tax credit ceiling on the total of all biomass appliances is $300.
Q: Will this be some sort of deduction applied to my total wages, like a medical deduction?
A: This is much better: the credit comes straight off the bottom line on your return.
Q: Let's say I install a new $1595.00 wood or pellet stove in 2012 or 2013 (Tax Credit $159.50) and I end up owing $159.50 taxes for that year.
How much do I pay?
A: Nothing. Your $159.50 Biomass Tax Credit will cancel out your $159.50 tax obligation.
Q: What if I have a $500 tax refund coming back?
A: You get your refund, plus the $159.50 Biomass Tax Credit on your new purchase. Your IRS refund check will total $659.50.
Q: What if I only paid $100 in taxes last year? Do I still get my $159.50 Tax Credit?
A: Nope, you get $100. The credit cannot exceed the amount of taxes you paid in.
Q: I am on social security and pay no taxes, can I get the credit?
A: Nada. The credit is only against taxes you paid in (or still owe) for the year you put the stove in service.
Q: I purchased a $2500 wood stove for my home in 2011, and received a tax credit for $250.00. We've moved, and are now considering a $3000
wood stove for this house. Can I claim the $300 tax credit on my 2013 return?
A: Nyet. There is a lifetime limit of $500 on the tax credits. You've already taken $250, so you only have $250 still available.
Q: Do all wood and pellet stoves qualify?
A: Only new stoves that achieve 75% minimum efficiency rating qualify for the tax credit.
Q: I checked the EPA label on the stove we want, and the efficiency rating was only 63%. Are we out of luck?
A: You might be OK. For some obscure reason, the EPA arbitrarily assigns an efficiency of 63% to all non-catalytic wood stoves, and 72% to all
catalytic wood stoves. The real number is a result of actual efficiency testing, and can be viewed on the manufacturer's website. For a more
detailed explanation, click here.
Q: What if I buy a wood or pellet stove second-hand? Can I take the credit?
A: Negative. The law specifies that the credit can only be applied to the purchase and installation of new stoves.
Q: Are you sure? I found the original bill online at http://www.irs.gov/pub/irs-drop/n-09-53.pdf , and it doesn't say anything about new or used.
A: It helps to have a magnifying glass and a working knowledge of legalese, but it's there alright, in Part 3, Section 2 .05 (1):
"A taxpayer may claim a credit... only if each of the following requirements is satisfied:
(b) The original use of the item commences with the taxpayer."
If you buy a used stove, you're not the original user, and you can't claim the tax credit.
Q: What about the hearth, stovepipe, chimney parts & labor I'll need to complete the installation? 10%?
A: It appears that, in the 2012-2013 version, the 10% credit applies to professional installation costs required for the proper and safe operation of
Q: How do I prove to the IRS that I've purchased a qualified stove? Do I send anything in with my tax return?
A: Yes, you must fill out Form 5695, which you can download at http://www.irs.gov/pub/irs-pdf/f5695.pdf. Your credit goes on line
22a. Save your
receipt for the stove and keep it in a safe place along with the Manufacturer's Certificate of Qualified Energy Property. You can download or print
Pacific Energy's certificate
here and Hearthstone's certificates here.
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