Federal Tax Credits for Bio-fuel Powered Heating Appliances
Written on: January 17, 2023 by ICM
News from NORA:
With the implementation of the Inflation Reduction Act of 2022, Congress has created a $600 consumer income tax credit for the installation of renewable fuels compatible liquid fuel appliances. With this act, low-carbon liquid fuel heating appliances have been identified as a viable path for GHG reductions.
The heating appliance qualifies by meeting three conditions:
- Placed into service after December 31, 2022
- Meets or exceeds Energy Star 2021 (boilers and furnaces) efficiency criteria
- Rated by the manufacturer for use with fuel blends at least 20% of the volume of which consists of an eligible fuel (eligible fuel: biodiesel or renewable diesel)
If your liquid fuel fired appliances meet these qualifications, homeowners can claim the credit using IRS Form 5695 Residential Energy Credits. Form 5926 is being updated by the IRS and should be available early in 2023.
About the tax credits, Michael Devine, NORA President said. “The Inflation Reduction Act of 2022 is perhaps the most important environmental legislation since the Clean Air Act more than fifty years ago. The inclusion of biofuel powered liquid fuel appliances for homeowner Federal tax credits,displays validation by Congress for the inclusion of these appliances in our pursuit to eliminate carbon emissions from homes. This industry took up the quest many years ago with the introduction of the Advanced Biofuel -biodiesel, into home heating fuel. Today, millions of homes are using biodiesel in ever increasing blends.”
Of course, the homeowner needs to be made aware of the credit’s availability. NORA suggests that manufacturers include this information to their supply chain, installers and the homeowner via product marketing, installation manuals and perhaps consumer literature. Retail installers also need to inform their customers of this opportunity to reduce their carbon impact while saving money.
The inclusion of this credit in the tax code is the result of a coordinated effort by many in the liquid fuel heating industry, particularly the National Energy & Fuels Institute with consultation from the Oilheat Manufacturers Association.