Tax Incentives for Installing a Wood-Burning Fireplace
Whether you’re genuinely curious about tax incentives or looking for the ultimate reason to add a fireplace to your home, you’re in the right place. Believe it or not, there are more reasons to consider installing a fireplace than just the extra heat; you can also benefit financially. A tax credit went into effect in January of 2021, creating an additional tax incentive for installing a wood-burning fireplace. Continue reading to learn more about this potential tax credit.
What Is the Fireplace Tax Incentive?
In January 2021, a new tax credit in the IRC went into effect. It states that Americans will be able to claim a 26 percent tax credit by purchasing and installing highly efficient wood or pellet stoves for their residential properties in 2021 and 2022. This tax incentive will remain in effect through 2023, but the credit will drop to 22 percent. While some tax credit opportunities have capped amounts, the IRC bases this one on the total cost of the unit and installation.
Do All Fireplaces Qualify?
Unfortunately, not all units qualify for this credit. In fact, most fireplaces on the market don’t qualify. The main purpose of these tax incentives is to encourage Americans to install more efficient heat sources in their homes. With that said, the fireplace must have a higher heating value (HHV) of 75 percent efficiency or higher.
How To Claim This Incentive
If you’re looking for a qualifying unit, the Environmental Protection Agency (EPA) created a database that indexes all of the fireplaces that qualify for the tax incentive. If the unit you’re looking at isn’t on the list, it simply doesn’t meet the criteria for the credit.
Once you find your unit, you must keep the purchase receipt and installation paperwork on file and claim the residential energy credit on your annual tax forms. Whether you meet with a tax professional or do your own taxes online, you’ll still be able to claim your fireplace tax incentive.
After learning about the tax incentive for installing a wood-burning fireplace, you may be looking for suitable pellet or wood stoves for sale. Whether you want a wood or pellet fireplace, you can find a unit to suit your needs and meet the criteria for an additional tax credit on your annual return.