Humans have burned wood for warmth for several millennia. In order for Americans to boldly catch up to the 18th century wood-burning technology of the Amish people, the Internal Revenue Code provides a tax credit of up to $300 for wood-burning stoves used in people's homes.
Specifically, Internal Revenue Code section 25C provides a tax credit of up to $300 for the purchase of any "energy-efficient building property," which includes "a stove which uses the burning of biomass fuel to heat a
dwelling unit located in the United States and used as a residence by
the taxpayer, or to heat water for use in such a dwelling unit, and
which has a thermal efficiency rating of at least 75 percent." It is one of several credits for renewable energy used at home, since wood is renewable in the sense that the trees grow back after 30-60 years.
Biomass fuel is any plant-derived fuel, such as trees, wood pellets, and plants (including aquatic plants). In order to deter any smarty-pants who claims that coal is plant-derived, the fuel must be "available on a renewable or recurring basis."
The tax credit does not apply to electric heaters made out of wood in order to look Amish.
The wood-burning stove tax credit originally expired at the end of 2011, but it was extended to apply to property placed in service in 2012 (retroactively) and through the end of 2013 as part of the urgently needed sequester tax legislation.
The section 25C tax credit when enacted in 2005 originally applied only to energy-efficient natural gas boilers, geothermal heaters, air conditioners, etc. The Emergency Economic Stabilization Act of 2008 expanded the qualifying property to include certain wood-burning stoves purchased through the end of 2009. Congress encouraged the burning of wood in order to reduce America's reliance on foreign oil and reduce pollution in general, though it is not clear how burning wood is cleaner than burning wood-derived fossil fuels. The credit has been extended several times since then.
Section 25C Nonbusiness energy property.
(a) Allowance of credit.
In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year *** (2) the amount of the residential energy property expenditures paid or incurred by the taxpayer during such taxable year.
(b) Limitations. ***
(3) Limitation on residential energy property expenditures.
The amount of the credit allowed under this section by reason of subsection (a)(2) shall not exceed—
(A) $50 for any advanced main air circulating fan,
(B) $150 for any qualified natural gas, propane, or oil furnace or hot water boiler, and
(C) $300 for any item of energy-efficient building property.
(d)(3) Energy-efficient building property.
The term “energy–efficient building property” means— ***
(E) a stove which uses the burning of biomass fuel to heat a dwelling unit located in the United States and used as a residence by the taxpayer, or to heat water for use in such a dwelling unit, and which has a thermal efficiency rating of at least 75 percent.
(d)(6) Biomass fuel.
The term “biomass fuel” means any plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers.