What is a federal consumer tax credit?
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.

When does this tax credit go into effect and how long will it last?
The tax credit went into effect January 1, 2009 and is valid only for the purchase of a qualifying biomass stove in 2009 and 2010. The sales receipt must indicate that the purchase was made between January 1, 2009 and December 31, 2010. The retailer must also provide the customer with certification that the stove meets the minimum 75% efficiency as required by the IRS for their records.

Who determined the tax credit guidelines for the qualifying units?
The Department of the Treasury, and specifically, the IRS.

Will other wood and solid-fuel appliances (like inserts, EPA-certified wood-burning fireplaces and outdoor wood heaters) qualify for the tax credit?
The IRS did not state that inserts are covered, or are not covered. However, based on EPA’s practice of treating inserts and freestanding biomass stoves in a similar fashion, manufacturers may choose to include inserts. At this time (June 2009) it is not clear whether EPA-certified wood-burning fireplaces or outdoor wood heaters qualify.

Do all pellet stoves qualify for the tax credit?
Any pellet stove that meets the 75% efficiency rating and has the qualifying documentation does qualify for the tax credit.

Are the installation costs, both labor and venting (chimney), covered?
Installation is covered as long as it is a required for proper and safe operation of the stove. The IRS is silent on the possible need to replace a chimney when upgrading an existing biomass stove; however, the US EPA has a section on its website titled, Installation Affects Efficiency, which retailers and consumers should consult when deciding if a chimney replacement is warranted when replacing an existing biomass stove. Learn more here.

Are biomass stoves installed in new homes, or vacation homes, covered by this tax credit?
The IRS is very clear that this credit applies only to existing principle residences, thus new homes and vacation homes would not qualify, nor are homes owned as rental units.

If a consumer purchases other products, such as solar collectors or window upgrades, does this mean a biomass stove tax credit can’t be taken?
There are two different sets of Federal tax credits for Energy Efficiency. One of the best discussions is found on the Department of Energy’s website: Windows and doors, HVAC and (non-solar) water heater upgrades, and roof upgrades, are in the same tax credit category as biomass stoves. The credit for these upgrades are capped at $1500 and limited to 2009 and 2010.

Why was 75% efficiency selected?
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, HPBA was not able to change the number to reflect a more realistic efficiency rating.

How is the 75% efficiency requirement determined?
The manufacturer of the stove must provide certification that the product tests for at least a 75% efficiency rating using the lower heating value, i.e., the heat value of a combustion process assuming that none of the water vapor resulting from the process is condensed out, so that its latent heat is not available.

How will a consumer know that a product is certified?
The manufacturer must certify that its product meets or exceeds the IRS efficiency requirement. 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 and to their dealers to facilitate identification of qualified products