2009 Tax Credit Information – Important Details
Signed into law on October 3, 2008, a consumer tax credit for the purchase of a 75%
efficient biomass stove in 2009 was included in the Emergency Economic Stabilization Act of
2008.
SEC. 302. CREDIT FOR NONBUSINESS ENERGY PROPERTY
- "from January 1, 2009 to December 31, 2010"
- "a stove which uses the burning of biomass fuel to heat a dwelling unit located in the United States and used as a residence by the taxpayer, or to heat water for use in such a dwelling unit, and which has a thermal efficiency rating of at least 75 percent."
- "BIOMASS FUEL- The term 'biomass fuel' means any plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers.
Guidelines for this tax credit are being determined by the U.S. Department of the Treasury
and the Internal Revenue Service (IRS). Although the tax credit takes effect January 1, 2009,
the guidelines for the credit should be issued later in January.
Improvements made in 2009 will be claimed on your 2009 taxes (filed by April 15, 2010) —
use IRS Tax Form 5695 (2009 version) — it will be available late 2009 or early 2010.
Improvements made in 2010 will be claimed on your 2010 taxes (filed by April 15, 2011) —
use IRS Tax Form 5695.
Tax Credit FAQs
Q: What is a federal consumer tax credit?
A: Consumers claim the credit on their federal income tax form at the end of the year. The credit then increases the tax refund or decreases the amount the taxpayer has to pay.
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.
Q: When does this tax credit go into effect and how long will it last?
A: The tax credit goes into effect January 1, 2009 and is valid only for the purchase of a qualifying wood or pellet stove in 2009. The sales receipt must indicate that the purchase was made between January 1, 2009 and December 31, 2009. If a retailer sells a stove before the list of qualifying stoves is made public, the retailer must keep a complete record of the sale (name and full contact information) so the purchaser can be notified.
Q: Who is determining the tax credit guidelines for the qualifying units?
A: The Department of the Treasury, and specifically, the IRS.
Q: Will other wood and solid-fuel appliances (like inserts, EPA-certified wood-burning fireplaces and outdoor wood heaters) qualify for the tax credit?
A: We do not know at this time. Right now, as the legislation is written, only 75% efficient stoves are included. HPBA requested that inserts be included, but no confirmation has been received.
Q: Do all pellet stoves qualify for the tax credit?
A: We do not know at this time. In a letter to the IRS, we recommended that all pellet stoves be included because EPA has previously assigned a default efficiency rating sufficient to qualify pellet appliances. However, we do not have a confirmation from the U.S. Department of the Treasury or the IRS about whether they will accept or reject this recommendation.
Q: Why was 75% efficiency selected?
A: 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. Unfortunately, with a truncated timeline of the legislation that included this tax credit, we were not able to change the number to reflect a more realistic efficiency rating.
Q: How will the 75% efficiency requirement be determined?
A: HPBA has provided the IRS with extensive information on product efficiency. The association recommends using the more realistic Lower Heating Value (LHV) method rather than the Higher Heating Value (HHV) that is generally used as an efficiency measurement for gas products. This would include a broader range of efficient biomass products for the tax credit. We are waiting for the IRS rule on the efficiency testing.
Q: How will a consumer know that a product is certified?
A: The manufacturer will have to certify that its product meets or exceeds the IRS efficiency requirements. A manufacturer's certification is a signed statement from the manufacturer certifying that the product qualifies for the tax credit. The IRS encourages manufacturers to provide these certifications on their websites to facilitate identification of qualified products. Tax payers must keep a copy of a certification statement for their records, but do not have to submit a copy with their tax return.
Q: What should a retailer and consumer do while waiting for qualifying information?
A: Keep exact records of any sale or purchase. It is imperative that retailers keep records
of sales and buyers should save all receipts for payment along with stove manufacturer and
model information.
For more information on the bill, check out the
U.S. Department of Energy website.
For more information on Federal Tax Credits for Energy Efficiency,
click here.
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, for example – lower your taxable income.
If you are in the 30 percent tax bracket, your income tax is reduced by
30 percent of the value of a tax deduction. But a tax credit reduces your
federal income tax by 100 percent of the amount of the credit.
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