In December of 2020, legislation passed by Congress included a new tax credit for wood heaters. This credit was passed under Sec. 25(D), which replaces the previous $300 credit under IRC Sec. 25(C).
The new investment tax credit (ITC) offers up to 26% credit during 2021 on the full cost of purchase and installation of an EPA-approved wood or pellet heater, including wood boilers and furnaces. The new credit went into effect on January 1, 2021 for all qualifying purchases and installations completed on or after that date, and will be available through December 31, 2023. The credit allows for a 26 percent investment tax credit on the purchase and installation costs (with no cap or lifetime limit) for tax years 2021 and 2022, and then steps down to 22 percent of purchase and installation costs in 2023 (under Sec. 25D of the U.S. tax code).
Qualifying heaters must have a thermal efficiency of at least 75 percent. Any EPA-approved wood boiler or furnace should qualify, but further guidance by the IRS will be provided over the course of 2021.
You can find more information on the 2021 Wood and Pellet Heater Investment Tax Credit (ITC), including an extensive FAQ, via the Hearth, Patio, and Barbecue Association website.
Obadiah’s Woodstoves and Alternative Energy also offers a wide selection of EPA-approved heaters of all types, and we are happy to answer any questions you may have regarding the new tax credit.