To claim the biomass stove tax credit on Form 5695, file it with your Form 1040 for the year the stove was placed in service, calculate 30 percent of your qualified costs on lines 29e through 29h of Part II, and cap the biomass entry at $2,000. The credit covers equipment placed in service through December 31, 2025, so most people claiming it now are filing a 2025 return during 2026.1Internal Revenue Service. Instructions for Form 5695 (2025)
Confirm the Stove Qualifies
The unit must burn biomass fuel and have a thermal efficiency rating of at least 75 percent measured by the higher heating value (HHV) of the fuel.2Office of the Law Revision Counsel. 26 USC 25C – Energy Efficient Home Improvement Credit A rating based on lower heating value won’t do, even if the number looks high enough. The stove or boiler must be used primarily to heat a living space or provide domestic hot water. Decorative fireplaces don’t qualify.
Acceptable fuels include wood pellets, solid wood, agricultural crops and crop residues, grasses, and wood waste.3ENERGY STAR. Biomass Stoves/Boilers Tax Credit The home has to be an existing structure you are improving, not new construction, and the unit must be originally placed in service by you during the tax year you claim the credit.4Internal Revenue Service. Energy Efficient Home Improvement Credit Buying used equipment or moving an existing stove to a different room won’t get you the credit.
Add Up Your Qualified Expenses
The credit is 30 percent of qualified costs. Qualified costs include the equipment itself and the labor for onsite preparation, assembly, and installation. Venting, piping, and wiring needed to connect the stove all count. Chimney liners installed for safe operation of the new stove are generally treated as venting and qualify; unusually extensive masonry work is worth running by a tax professional.
Subtract any rebates before you calculate 30 percent. A rebate from a Department of Energy program is treated as a purchase-price adjustment, not income, so it reduces your qualified expenses.5Internal Revenue Service. Announcement 2024-19 Utility company subsidies for the stove or its installation get subtracted the same way. Manufacturer rebates tied to the purchase price also come off the top. State energy incentives are generally not subtracted unless they act as a direct purchase-price reduction under federal tax law.4Internal Revenue Service. Energy Efficient Home Improvement Credit
So if you paid $6,000 for the stove and installation and received a $1,000 DOE rebate, your qualified expenses are $5,000 and your raw credit is $1,500.
Know the $2,000 Cap
The biomass stove credit is capped at $2,000 per year.2Office of the Law Revision Counsel. 26 USC 25C – Energy Efficient Home Improvement Credit Spend $8,000 on a qualifying stove and installation, and 30 percent works out to $2,400, but the credit stops at $2,000.
That $2,000 ceiling is shared with heat pumps and heat pump water heaters. If you installed a biomass stove and a heat pump in the same tax year, the combined credit for those items still can’t exceed $2,000.4Internal Revenue Service. Energy Efficient Home Improvement Credit A separate $1,200 annual cap applies to other improvements like insulation, windows, central air conditioners, and conventional water heaters, so the most anyone can claim across the full Energy Efficient Home Improvement Credit in a single year is $3,200.1Internal Revenue Service. Instructions for Form 5695 (2025)
The credit is nonrefundable. It can zero out your tax, but it won’t generate a refund on its own, and any unused portion doesn’t carry to a later year.2Office of the Law Revision Counsel. 26 USC 25C – Energy Efficient Home Improvement Credit
Gather the Documents You’ll Need
Starting with tax year 2025, the stove must have been purchased from a Qualified Manufacturer that has signed an agreement with the IRS. The manufacturer issues a Qualified Manufacturer Identification Number (QMID) that you enter on Form 5695.6Internal Revenue Service. Energy Efficient Home Improvement Credit Qualified Manufacturer Requirements Ask your dealer or the manufacturer directly if you don’t already have it.
Also pull together your purchase receipt, any separate invoices for professional installation, venting, and related work, and documentation of any rebate you received. You don’t mail these with your return, but keep them in case the IRS asks for verification.
Fill Out Form 5695, Part II
Download Form 5695 from the IRS website.7Internal Revenue Service. About Form 5695, Residential Energy Credits Biomass costs are entered in Part II, on lines 29e through 29h.
- Line 29e: enter the QMID and the cost of your most expensive biomass stove or boiler, after subtracting any rebates.
- Line 29f: enter the cost of any additional biomass stoves or boilers. Enter zero if you installed only one. If you list more than one unit here, attach a statement giving the QMID and cost of each.
- Line 29h: this line caps at $2,000. If the combined amounts on lines 29e through 29g would exceed $2,000, enter $2,000.8Internal Revenue Service. Instructions for Form 5695 (2025)
The rest of Part II walks you through adding your other qualifying improvements and applying the relevant limits. Your final credit lands on line 32. In practice it will be the lowest of three numbers: 30 percent of your qualified costs, the applicable dollar cap, or your tax liability for the year.1Internal Revenue Service. Instructions for Form 5695 (2025)
Attach the Form and Move the Credit to Schedule 3
Attach the completed Form 5695 to your Form 1040 or 1040-SR. The amount from Form 5695, line 32, goes on Schedule 3 (Form 1040), line 5b.9Internal Revenue Service. Form 5695, Residential Energy Credits Tax software handles the transfer automatically. Paper filers need to attach the form and confirm the Schedule 3 entry matches.
If You Share the Home With Someone You’re Not Married To
When two or more unmarried people share a home and split the cost of a biomass stove, each files their own Form 5695. The $2,000 cap applies to the property, not to each occupant. Each person’s share of the credit is $2,000 multiplied by a fraction: what that person paid divided by the total everyone paid for the stove.10Internal Revenue Service. Correction to the 2025 Instructions for Form 5695 Joint Occupancy Calculation Check the box on line 32a and attach a statement explaining the split.
Married couples filing jointly share one $2,000 limit and file a single Form 5695. Married couples filing separately who live in the same home follow the same allocation rules as unrelated co-occupants. Spouses living in separate homes each get their own $2,000 limit for a qualifying stove in their own home.1Internal Revenue Service. Instructions for Form 5695 (2025)
Keep Your Records After Filing
Hold onto purchase receipts, installation invoices, manufacturer documentation, and rebate records for at least three years from the date you file. The IRS can generally review a return within three years of filing, and returns filed early are treated as filed on the due date for this purpose.11Internal Revenue Service. Topic No. 305, Recordkeeping Without documentation, the credit can be disallowed on audit and you would owe the tax plus interest.