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Regulatory Alert
New $600 Federal Tax Credit for B20 Compatible Furnaces and
Boilers Available to Homeowners Beginning January 1, 2023
December 14, 2022
EMA Contact: Mark S. Morgan Regulatory Counsel mmorgan@emamerica.org
The recently passed Inflation Reduction Act (IRA) includes a provision to incentivize the efficiency of heating oil equipment while increasing the amount of biodiesel blended into the fuel. Under the IRA, homeowners are eligible for tax credits of $600 for installation of new oil/biofuel blend-compatible heating appliances. The credit is available to homeowners on an annual basis and capped at $600 per year. Beginning January 1, 2023, heating oil dealers should make their customers aware of the new tax credit and explain how to apply for it.
In order to qualify for the $600 federal tax credit, the following conditions must be met:
Equipment Placed in Service After December 31, 2022
- Equipment must have 2021 Energy Star ratings (87 AFUE for oil boilers and 85 AFUE for furnaces) and be certified by the manufacturer to burn heating oil blended with a 20 percent biodiesel or renewable diesel fuel. This equipment is available now.
Equipment Placed in Service After December 31, 2026
- Equipment must have an AFUE of at least 90 percent and be certified for a 50 percent blend of biodiesel or renewable diesel fuel. This equipment will be made available in 2023.
Many new heating oil boilers and furnaces currently available from manufacturers should be compatible with 20% biodiesel blends and qualify for the $600 credit on new installations beginning January 1, 2023. Manufacturers are currently providing certification for B20 compatibility on new equipment. Please check with your supplier to ensure their equipment is compliant and that certifications are available to provide to the homeowner. Homeowners may apply for the credit on IRS Form 5695 and file it with their 1040, 1040-SR or 1040-NR return. However, homeowners must wait for the IRS to issue an updated Form 5695 and guidance before filing for the credit. The IRS expects to publish the updated Form 5695 and guidance sometime in January.
EMA will provide the form and guidance once they become available from the IRS.