RAIS Wood Stove Tax Credit FAQ s

RAIS Wood Stove Tax Credit FAQ s
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. This new credit reduces the amount of tax you owe. The new credit is a
reduction of total income tax at the bottom of your return, up to $1500. This tax
credit is a non-refundable tax credit available for individuals who pay taxes and
who make energy-conscious purchases to improve the energy efficiency of their
home.
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 went into effect January 1, 2009 and is valid only for the
purchase of a qualifying biomass stove during 2009 and 2010. The maximum
tax credit for the two-year period is $1500. The sales receipt must indicate that
the purchase was made between January 1, 2009 and December 31, 2010.
Q: Who determined 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 hydronic heaters) qualify for the tax credit?
A: 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 hydronic
heaters will qualify.
Q: Do all pellet stoves qualify for the tax credit?
A: Any pellet stove that meets the 75% efficiency rating and has the qualifying
documentation does qualify for the tax credit.
Q: Are the installation costs, both labor and venting (chimney), covered?
A: 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 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
installing a biomass stove.
Q. Are biomass stoves installed in new homes, or vacation homes, covered
by this tax credit?
A. No. The IRS is very clear that this credit applies only to existing principal
residences, thus new homes and vacation homes would not qualify, nor would
homes owned as rental units.
Q. 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?
A. The tax credit is an aggregate, meaning the 2-year $1500 total credit can be
used for items other than biomass stoves, such as windows and doors, HVAC
and non-solar water heater upgrades, and roof upgrades, all of which are in the
same tax credit category as biomass stoves. The tax credit for all of these
upgrades is capped at $1500 for the two year period. For example, if a taxpayer
uses the entire $1500 for a product in 2009, then they cannot use it in 2010 for
any other product in that same tax credit category.
Q: Are prior purchases covered?
A: Prior purchases made between January 1, 2009, and June 1, 2009 are
covered if the manufacturer offers a certification statement for the product.
Q: Do stoves that are not newly tested for efficiency qualify under the tax
credit?
A: If a manufacturer has documentation that a stove has already achieved the
required efficiency rating and issues a certification statement for the product, no
further testing is required.
Q: Why was 75% efficiency selected?
A: 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.
Q: How is the 75% efficiency requirement determined?
A: 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.
Q: What must a manufacturer provide to a consumer to prove that a
product is certified?
A: The manufacturer must certify that its product meets or exceeds the IRS
efficiency requirement. To do so, the manufacturer of a stove that qualifies for
the tax credit may certify to a taxpayer that the component is a "qualified energy
property" by providing the taxpayer with a manufacturer's certification
statement that satisfies the requirements of sections 6.04, 6.05 and 6.06 of the
IRS Guidance found at http://www.irs.gov/pub/irs-drop/n-09-53.pdf. The
certification statement may be provided by including a written copy of the
statement with the packaging of the component or property, in printable form on
the manufacturer's website, or in any other manner that will permit the taxpayer
to retain the certification statement for tax recordkeeping purposes.
Q: What information should be included in a manufacturer's certification
statement?
A: A manufacturer's certification statement must contain the following
information:
(1) The name and address of the manufacturer.
(2) Identification of the class of qualified energy property (Biomass-Burning
Stove) in which the property is included.
(3) The make, model number, and any other appropriate identifiers of the
stove.
(4) A statement that the component is an eligible qualified energy property.
(5) A manufacturer's certification statement must contain a declaration,
signed by a person currently authorized to bind the manufacturer in these
matters, in the following form: "Under penalties of perjury, I declare that I have
examined this certification statement, and to the best of my knowledge and
belief, the facts are true, correct, and complete."
Q: What should a retailer provide and the customer retain for tax
purposes?
A: Retailers and consumers must keep exact records of any sale or purchase.
Retailers should provide a consumer with the manufacturer's certification
statement for the specific product model purchased. A consumer may rely on a
manufacturer's certification statement that their products are qualified energy
property. A taxpayer is not required to attach the certification statement to the
return on which the credit is claimed. A consumer claiming a credit for qualified
energy property should retain the certification statement as part of the taxpayer's
records. Manufacturers should make this certification document available to
consumers on the web, in the product packaging, or in some other easily
accessible manner.
Q: Does the stove need to be manufactured in the U.S. to qualify for the
credit?
A: No; there is no "Buy America" component to this tax credit.
The IRS Guidance can be found at http://www.irs.gov/pub/irs-drop/n-0953.pdf .
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