Tax Credit for Woodstoves

A person may record a credit for his wood stove on his federal tax return if he satisfies certain criteria.

Signed in December 2010, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act extended certain tax credits available to taxpayers who make energy-efficient improvements to their residences. If a person installs a wood stove in his home, the Internal Revenue Service may allow him to record a credit on his federal tax return if the stove has an efficiency rating above a certain level and the total amount of energy-efficient credits taken by the taxpayer in the past does not exceed his lifetime limit.

Tax Credit

A tax credit reduces the amount of income tax a person owes on a dollar-for-dollar basis. If, for instance, a person owes $10,000 in federal income taxes and earns a $500 tax credit for his energy-efficient home improvements, his tax bill will equal $9,500, or $10,000 - $500, as a result of the credit.

Tax Credit for Wood Stove

Compared to the energy efficiency credit available to a taxpayer who placed a wood stove in service in 2009 and 2010, the newer credit is lower, meaning the federal government lowered the credit to the same amount available in 2006 and 2007. At the time of publication, a taxpayer may claim a tax credit for purchasing and installing a wood stove in an amount equaling the lesser of 10 percent of the stove’s purchase price or $300 if he satisfies certain criteria. The available credit expires on Dec. 31, 2011.

Criteria

Currently, the Internal Revenue Service limits the total amount a single taxpayer may claim in energy-efficient tax credits during his lifetime to $500. If a taxpayer surpassed this amount on any one or a combination of his previous federal tax returns, the IRS forbids him from claiming a credit for his wood stove in the current year. If a taxpayer is under his limit, the IRS will allow him to claim a credit for his stove if he places the unit in service in his existing primary residence before the credit’s expiration and the stove has a thermal efficiency rating of 75 percent or greater.

Placed In Service

The IRS considers a wood stove placed in service on the day it is available and ready for use by a taxpayer. The day a person purchases a wood stove may not be the date the IRS considers the unit placed in service, in other words.

Taxes

The IRS requires a person claiming a credit for his wood stove to record the amount of his credit on Line 52 on Form 1040 when preparing his federal tax return. The IRS further requires the taxpayer to file Form 5695 with his tax return to support his residential energy tax credit.

References

• Energy Star: 2011 Federal Tax Credits for Consumer Energy Efficiency
• Energy Star: How Do I Apply for the Tax Credit?...
• Easy Eco Blog: Federal Tax Credits for Energy Efficiency -- Wood Heat Stoves, Pellet Stoves, Fireplace Inserts
• "USA Today"; Getting Tax Breaks for Energy-Efficient Home Improvements; Sandra Block; August 2011
• Energy Star: Have the Tax Credits Been Extended for 2011?