Federal Tax Credit for B20 Compatible Heating Systems Expires on December 31

The Inflation Reduction Act (IRA) included 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 the 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. The One Big Beautiful Bill included language to end the credit by December 31, 2025, so homeowners have until the end of the year to claim the credit.

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.

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 the homeowner. Homeowners may apply for the credit on IRS Form 5695 and file it with their 1040, 1040-SR or 1040-NR return. The IRS published the updated Form 5695 to claim the credit. Click here to view it.