Frequently Asked Questions About Federal Tax Credits

Frequently Asked Questions about Federal Tax Credits

What is the BTU Act and what does it mean?

The Biomass Thermal Utilization Act became law in December of 2020 and allows for a 26% federal tax credit on the purchase and installation of high-efficiency home heating equipment that fires wood pellets for heat and hot water.

Homeowners now have the ability to consider renewable heating at a comparable price point to fossil fuel system costs, thanks to the tax credit combined with state rebate incentives.

This is the first major bipartisan tax legislation aimed at renewable energy projects at the residential level and puts renewable wood pellets in the same category as solar and geothermal.  New England is especially grateful because up to 80% of our homes rely on oil for heating.

See this article from Biomass Magazine for more info on the passage of the BTU Act.

What qualifies for this incentive?

Home heating equipment that fires wood pellets for heat and hot water which is at least 75% efficient.  All of Maine Energy Systems’ residential heating solutions are qualified for this tax credit.

Does the tax credit apply to systems with heat and hot water, or just heat?

As long as the heat or hot water is fueled by wood pellets, it falls under the tax credit.  So, if the heating system (fired by wood pellets) is tied into and heating the hot water, it qualifies.  If the water is completely separate and electric or fueled by a fossil fuel, it would not qualify on its own.

Do rebates still apply?

State-specific rebate programs are still in effect; see your individual state’s program for details on applying and what qualifies for those incentives.

Average installations will qualify for up to $5,000-$6,000 of tax credits starting now.  Homeowners can also take advantage of state incentives and rebates of between $6,000 and $10,000 within New England.

Is the tax credit on the entire purchase and installation of a new home heating system or is it only 26% on what remains after taking advantage of a state rebate?

The 26% tax credit granted by the BTU Act is on the total purchase and installation cost exactly like state rebates are currently applied.

Who is the best resource for in depth questions about tax credit and rebate questions?

Your tax accountant is the best resource that you have for detailed questions as the BTU Act just became law at the start of 2021.

Is the BTU Act retroactive?

No, unfortunately for those who were at the forefront of installing renewable heating, the BTU Act’s tax credit is not retroactive.  If you currently have a MESys wood pellet system, MESys wants to thank you for being an early adopter and will give you a free ton of pellets for each referral who purchases and installs a new MESys system in 2021.  Those referrals will also have the opportunity to take advantage of the federal tax credit and state specific rebates.  For program details or to refer someone, contact [email protected]

Does the BTU Act apply to commercial or industrial installations?

At this time, the BTU Act and tax credit only apply to residential installations.  While the renewable heating industry is actively working to expand this to commercial and industrial applications, you can also write to your legislators to encourage them to support the expansion as well.