What is this new tax credit?

• Effective Dates: The new tax credit under Sec. 25(C) of the U.S. Internal Revenue Code (“IRC” or “tax code”) took effect on January 1, 2023, for qualifying purchases and installations completed on or after that date, through December 31, 2032.
• Credit Amount: Creates a new tax credit of 30 percent of the purchase and installation costs (with a $2,000 annual cap with no lifetime limit) for tax years 2023 through 2032.
• Qualifying Products: Qualifying products (any biomass-fueled heater) must have a thermal efficiency of at least 75 percent per the higher heating value (HHV) of the fuel
  • The EPA-certified wood heater database may be referenced (not all products on the EPA list qualify. Look for products with efficiencies of at least 75 percent)
  • A manufacturer certification statement attesting that a product qualifies can also be relied upon

What happens to the 25(D) tax credit?

• Eliminates the tax credit for biomass stoves under IRC Sec. 25(D) starting in 2023 
• Any product purchased in 2022 that qualifies for the new Sec. 25(C) credit, but isn’t installed until 2023, can be claimed under the Sec. 25(C) credit on a 2023 tax return. Products must be claimed on the tax return year in which the product installation is complete.

HPBA has also updated its information page for retailers, which can be found at the link below. 

January 2023 update:  

In December 2022, the IRS issued its new Guidance and FAQs for the new 25(C) tax credit (effective for installations between January 1, 2023, and December 31, 2032) and updated its guidance for the expiring 25(D) tax credit (effective for installations between January 1, 2021, and December 31, 2022) can be found at the link below. HPBA highlighted the important Sections of the Guidance and FAQs. 

September 2022 update: 

With the August 16, 2022, signing of the Inflation Reduction Act (IRA), high-efficiency biomass heating products once again qualify for a tax credit under Section 25(C) of the Internal Revenue Code (“IRC” or “tax code”). This new 30 percent tax credit – capped at $2,000 annually – is available for appliances installed between January 1, 2023, and December 31, 2032. The credit can be used on the purchase and installation costs of qualifying appliances. To be eligible for the tax credit, an appliance must have a thermal efficiency of at least 75 percent per the higher heating value (HHV) of the fuel. The IRA removes our products from Sec. 25(D) of the tax code where appliances were eligible for an uncapped 26 percent tax credit in 2021 and 2022.

Guidance and FAQs for both the upcoming 25(C) tax credit (effective for installations from January 1, 2023 and December 31, 2032) and the expiring 25(D) tax credit (effective for installations between January 1, 2021 and December 31, 2022) can be found further down the page.

Feel free to contact the Government Affairs Department with any questions that are not answered by our website.