How to Claim the Wood Stove Tax Credit for Your Home Installation

Installing a wood stove in your home can be an energy-efficient way to heat your space, and a federal tax credit can help offset some of the costs. This incentive is part of the U.S. government’s effort to promote cleaner and more efficient heating appliances.

Qualifying Stoves

Not all wood stoves qualify for the tax credit. To be eligible, a stove must have a thermal efficiency rating of at least 75% based on the higher heating value (HHV) measurement. The Environmental Protection Agency (EPA) maintains a database of certified wood stoves that meet these standards. Many manufacturers label their products with EPA certification, making it easier to identify eligible models.

Wood pellet stoves, which burn more efficiently than traditional firewood, often meet or exceed the required threshold. These models typically feature automated fuel feeding systems and advanced combustion technology, improving both performance and emissions output.

The stove must be installed in a primary residence within the United States. Rental properties and second homes do not qualify. The unit must also be new—used or refurbished stoves are not eligible. Some states offer additional incentives for high-efficiency wood stoves, which can be combined with the federal credit to reduce costs further.

Documentation Requirements

To claim the tax credit, you must keep records proving the stove meets efficiency standards and was installed in a qualifying residence.

Manufacturer’s Certification

A manufacturer’s certification statement confirms that the stove meets efficiency requirements. This document typically includes the stove’s make and model, a declaration that it meets or exceeds the 75% thermal efficiency threshold using the HHV measurement, and a reference to IRS guidelines.

Manufacturers often provide these certifications on their websites or with product packaging. The IRS does not require you to submit this document with your tax return, but you must keep it in case of an audit. If the manufacturer does not provide a certification statement, you may need to contact them directly.

Proof of Purchase and Installation

You must provide proof of both the purchase and installation of the wood stove. A detailed sales receipt or invoice should list the date of purchase, the retailer’s name, the stove’s model number, and the total cost. If you financed the purchase, a loan agreement or credit card statement showing the transaction may also serve as supporting evidence.

Installation costs can be included in the credit calculation, so keep records of any labor or materials associated with the installation. If a contractor performed the installation, obtain an itemized invoice specifying the work completed and the costs. If you installed the stove yourself, retain receipts for materials purchased, such as venting components or fireproof flooring.

Property Records

The tax credit applies only to stoves installed in a primary residence. Documentation proving homeownership and residency may be required, such as a property tax bill, mortgage statement, or homeowner’s insurance policy listing your name and the property address. If you recently purchased the home, a closing statement or deed can serve as proof of ownership.

For those who own multiple properties, the stove must be installed in the home where they primarily reside. The IRS may request additional documentation, such as utility bills or voter registration records, to verify residency. Stoves installed in rental properties or vacation homes do not qualify, and claiming the credit incorrectly could result in penalties or an audit.

Filing Procedure

To claim the wood stove tax credit, complete IRS Form 5695, which covers Residential Energy Credits. Enter the cost of the stove and installation expenses in the appropriate section. The credit is nonrefundable, meaning it can reduce your tax liability to zero but will not generate a refund beyond what you owe.

After determining the eligible credit, the amount carries over to Schedule 3 of Form 1040, where it offsets any taxes due. If your total credit exceeds your tax liability for the year, you may be able to roll the unused portion forward to future tax years.

Filing electronically can simplify the process, as tax software guides users through the necessary calculations. If filing a paper return, attach Form 5695 to your Form 1040 and retain copies for your records. If using a tax professional, inform them about the purchase so the credit is properly applied.

Tax Impact

Unlike a deduction, which lowers taxable income, a tax credit directly reduces the amount of taxes owed. For example, if a taxpayer owes $2,500 in federal income tax and qualifies for a $1,500 credit, their total tax due decreases to $1,000.

This credit falls under the Energy Efficient Home Improvement Credit (26 U.S. Code 25C) and is subject to an annual limit. The Inflation Reduction Act of 2022 expanded this provision, setting a maximum credit of 30% of eligible costs, up to a $2,000 cap per year for biomass stoves. If other energy-efficient upgrades, such as heat pumps or insulation, are claimed within the same tax year, the total credit cannot exceed the statutory limits.

Recordkeeping

Keeping thorough records is necessary in case of an IRS audit. The IRS recommends retaining all relevant documents for at least three years from the date you file your return.

A well-organized recordkeeping system should include copies of IRS Form 5695, receipts for the stove and installation, the manufacturer’s certification statement, and property records proving primary residence status. Digital storage solutions, such as cloud-based document management systems or encrypted external drives, can help safeguard these records. If using a tax professional, providing them with a complete set of documents can streamline the filing process.