Wood and Pellet Heater Tax Credit, New 2021
A new tax credit for wood and pellet heaters, the Wood and Pellet Heater Investment Tax Credit (ITC), officially came into effect on January 1, 2021. The new credit – under Internal Revenue Code Section 25(D) – was created by spending legislation enacted by Congress at the end of 2020.
This is a brand-new tax credit. If a taxpayer claimed the old credit in the past, they could make a qualifying purchase in 2021 and claim this new credit.
How much is the new credit?
In 2021 and 2022, taxpayers can claim 26 percent of purchase AND installation costs, with no limit. In 2023, that amount drops to 22 percent. But this is MUCH more generous than the old tax credit, which was just $300 and had many limitations.
What qualifies for the new Wood and Pellet Heater ITC?
Any wood or pellet-fueled heater (heats air or water) that is at least 75 percent efficient per the higher heating value (HHV) of the fuel. This is a different requirement when compared to the old tax credit. Consult the EPA certified list of heaters to see which products qualify. All efficiency numbers on the EPA list are in HHV.
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