Fire and Water - 2009/2010 Tax Credit Information

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2009/2010 Tax Credit Information

Important New Details...

Included in the 2009 Economic Stimulus legislation signed into law by President Obama on February 17, 2009, is a 30% (up to $1,500) consumer tax credit in 2009 and 2010 for the purchase of a 75% efficient biomass-burning stove as measured using a lower heating value. Pellet Fuels Institute (PFI) and the Hearth, Patio & Barbecue Association (HPBA) succeeded in improving the tax credit to promote renewable energy and help consumers fight rising home heating costs.

The tax credit provisions in this new legislation contain improvement amendments to the legislation passed in October 2008. The major changes made were an extension of the credit to 2010 and an increase of the credit from $300 to 30% of the total cost.

Guidelines for determining what stoves meet the efficiency requirements to qualify for the credit or how a manufacturer will qualify their products are determined by the U.S. Department of the Treasury and the Internal Revenue Service (IRS). The tax credit took effect January 1, 2009, though the IRS has not issued the guidelines. These guidelines are expected by March 31, 2009, however the credit applies to all qualifying stoves sold in 2009 and 2010. PFI and HPBA will keep the industry informed on the status of the guidelines for qualifying stoves. For the latest information, check the PFI website, www.pelletheat.org.

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 biomass-burning stove in 2009 and 2010. The sales receipt must indicate that the purchase was made between January 1, 2009 and December 31, 2010. 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: This legislation includes only 75% efficient biomass-burning stoves. In communication with the IRS, PFI and HPBA have 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 number was approved 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: The 2009 Economic Stimulus legislation, signed into law on February 17, 2009, stated that a lower heating value will be used to measure the efficiency of a biomass-burning stove. PFI and HPBA have provided the IRS with extensive information on product efficiency. This method will include a broader range of efficient biomass products for the tax credit and be consistent with the original legislative intent.

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.

Q: How does the language in this legislation differ from what was passed in October 2008?

A: The new legislation 1) increases the tax credit from $300 to 30% of the total cost of a biomass-burning stove, 2) extends the credit to purchases in 2010, and 3) measures the stove’s efficiency based on the lower heating value.

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