Residential Modern Wood Heat Installations Now Qualify for 26% Federal Tax Credit

Modern wood heating installations in homes are now eligible for the same federal tax credit that has been available to other renewable energy systems for years.

Homeowners can receive up to a 26% federal tax credit on residential installations of high-efficiency wood heating systems such as wood or pellet stoves and whole-home pellet or wood chip boiler systems. The long-sought-after tax credit was included in the Consolidated Appropriations Act of 2021.

Modern wood heating systems can help homeowners reduce dependence on non-renewable fossil heating fuels like oil and propane. Using wood for heating strengthens local economies, promotes forest health by creating markets for low grade timber, lowers the risk of wildfires and reduces greenhouse gas (GHG) emissions. By setting a 75 percent efficiency threshold, this will spur deployment of the cleanest and most efficient modern wood and pellet heaters.

An independent analysis concluded that using wood pellets for heat reduces greenhouse gas emissions by 54% compared to oil and 59% to natural gas. The life-cycle analysis accounted for all greenhouse gas emissions from sourcing, processing, and transporting fuels. The study concluded that impacts decrease further after 50 years, with greenhouse gas emissions from pellets dropping to 62% less than oil, 67% less than natural gas, and 56% less than propane.

For more information about modern wood heating options, visit the Modern Wood Heat section of this website or visit  Feel Good Heat website.

For more information about the Federal tax credit, see

In our neighboring states of New Hampshire, Maine, New York and Vermont, the states offer rebates and incentives for homeowners and businesses to upgrade or convert fossil fuel systems to modern wood heat.  Similar incentives were previously offered in Massachusetts through the Wood Stove Changeout Program and Mass DOER, but they are not available now.