Copyright 2010 Shangrilah Stove and Spa 2011 Biomass Tax Credit Extension FAQ's Q: How does the new 2011 extension of the Recovery Act affect the purchase of wood stoves? A: If you purchase and install a new, qualifying biomass (wood or pellet) stove between January 1, 2011 and December 31, 2011, you can take a credit against your 2011 taxes totalling 10% of the purchase price, up to $3000 (maximum credit $300). Q: So, what does it take for a stove to qualify? A: The stove must be new, must burn biomass fuel, must achieve a thermal efficiency rating of 75% or greater, and must be purchased and put into service by Decemer 31, 2011. Q: Could I buy more than one stove and get a 10% credit for each of them on this program? A: Yes, if all are installed in your principal residence, up to the credit ceiling of $300. Q: So, I could buy new stoves for my house, my summer cabin and my rental house for a total of up to $3000, and get a 10% credit (up to $300) for the total? A: Nope, the credit only applies to stoves installed in existing principal residences. Your summer cabin and rental don't qualify. Q: Does this program apply only to wood stoves? A: The 10% tax credit also applies to other biomass appliances, such as pellet and corn stoves, as long as they achieve at least 75% thermal efficiency. For more information, click here., then click the tab labeled Biomass Stoves. Q: What if I spend $4,000 on my new stove? 10% would be $400. Would I get the $400? A: Nope, the tax credit ceiling on the total of all biomass appliances is $300. Q: Will this be some sort of deduction applied to my total wages, like a medical deduction? A: This is much better: the credit comes straight off the bottom line on your return. Q: Let's say I install a new $1595.00 wood or pellet stove in 2011 (Tax Credit $159.50) and I end up owing $159.50 taxes for 2011. How much do I pay? A: Nothing. Your $159.50 Biomass Tax Credit will cancel out your $159.50 tax obligation. Q: What if I have a $300 tax refund coming back? A: You get your refund, plus the $159.50 Biomass Tax Credit on your new purchase. Your IRS refund check will total $459.50. Q: What if I only paid $100 in taxes last year? Do I still get my $159.50 Tax Credit? A: Nope, you get $100. The credit cannot exceed the amount of taxes you paid in. Q: I am on social security and pay no taxes, can I get the credit? A: Nada. The credit is only against taxes you paid in (or still owe) for the year you put the stove in service. Q: Do all wood and pellet stoves qualify? A: Only new stoves that achieve 75% minimum efficiency rating qualify for the tax credit. Q: What if I buy a wood or pellet stove second-hand? Can I take the credit? A: No, the law specifies that the credit can only be applied to the purchase and installation of new stoves. Q: Are you sure? I found the original bill online at http://www.irs.gov/pub/irs-drop/n-09-53.pdf , and it doesn't say anything about new or used. A: It helps to have a magnifying glass and a working knowledge of legalese, but it's there alright, in Part 3, Section 2 .05 (1): "A taxpayer may claim a credit... only if each of the following requirements is satisfied: (b) The original use of the item commences with the taxpayer." If you buy a used stove, you're not the original user, and you can't claim the tax credit. Q: What about the hearth, stovepipe, chimney parts & labor I'll need to complete the installation? 10%? A: Nope, in the 2011 version, the 10% credit applies to the price of the stove only. Q: How do I prove to the IRS that I've purchased a qualified stove? Do I send anything in with my tax return? A: Yes, you must fill out Form 5695, which you can download at http://www.irs.gov/pub/irs-pdf/f5695.pdf. Your credit goes on line 3a. Save your receipt for the stove and keep it in a safe place along with the Manufacturer's Certificate of Qualified Energy Property. You can download or print Pacific Energy's certificate here, the Bis Ultima and Tradition CE certificates here, and Hearthstone's certificates here.