Tax Credit Frequently Asked Questions

Is there a tax credit for corn, pellet, or wood-burning (biomass) stoves?

There is a federal tax credit for biomass fuel stoves (used for heat or water heating) "placed in service" in 2009 and2010 for 30% of the cost (including installation) up to $1,500. The stoves must have a thermal efficiency rating of at least 75% as measured using a lower heating value.

The law defines "biomass fuel" as 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), plant (including aquatic plants), grasses, residues, and fibers.

To verify tax credit eligibility make sure you get a Manufacturer's Certification Statement. (Validation from LMF is required to obtain a Manufacturer's Certificate, please call or email LMF).

What is a Manufacturer's Certification Statement?

A Manufacturer's Certification Statement is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.

If I claimed $500 in tax credits in 2006 or 2007 under the previous tax credit program, am I still eligible?

Yes. The new law removes the lifetime caps so you are eligible.

When and how do I claim the tax credit?

Claiming the tax credit is easy-you only need to file a simple IRS 5695 form with your tax return. Speak with your tax adviser. The manufacturer of the equipment will provide a certificate you should keep on file.

Can I claim $1500 in tax credits for improvements made in 2009 and again for improvements made in 2010?

No. You can only claim a total of $1500 in tax credits for improvements made in the combined two year period of 2009 and 2010.

Can a homeowner use the entire $1500 limit as a credit toward the installation of one appliance?

Yes. A homeowner may use the entire $1500 in tax credits for installing a single appliance, such as a qualified furnace, air conditioner, heat pump, or hot water heater.

What happens if the 30% of the installed costs is less than $1500?

The homeowner can "bank" the remaining available tax credit for other qualified improvements. Any single installation that costs more than $5000 will instantly reach the $1500 limit.

Does the tax credit apply to the cost of the equipment or equipment plus labor?

The tax credit applies to the installed costs of the qualified equipment, which includes labor.

What's the difference between a tax credit and a tax deduction?

As a tax credit applies against the taxpayers' liability. A tax deduction applies against a taxpayer's income, lowering the adjusted gross income and possibly moving the taxpayer to a lower tax bracket. Tax credits have a greater benefit to a taxpayer.

Can a homeowner claim the credit for improvements to a second home?

No. The tax credit is only available for improvement to the taxpayer's primary residence.

Does the homeowners who lives in a modular home or mobile home qualify?

Yes. As long as the improvements meet the qualifying criteria and the homeowners primary residence they may claim the tax credit.

What other types of energy efficiency improvements qualify for the tax credits?

Homeowners may be able to qualify for the tax credits if they make qualified improvements to: windows and doors including skylights, storm windows and storm doors; roofing including metal and asphalt roofs; and insulation. All of these improvements qualify if they meet certain minimum standard, but homeowner may only claim $1500 in total for any improvements.

Does a heat pump need to meet the minimum each of the minimums to qualify or just one?

Heat pumps must meet each of the minimum standards listed above to qualify for the tax credits.

Does this apply to equipment installed in new homes?

No. The tax credit can only be claimed by taxpayers for improvements to existing homes.

Does this replace the Department of Energy or Energy Star program?

These tax credits are from the same program, but it has been modified and expanded. It is the same program that allowed taxpayers to claim up to $500 in tax credit in 2006 and 2007, and part of 2009. The differences are the tax credit limit is higher and the per-appliance caps have been removed.