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Federal Tax Credits for Bio-fuel Powered Heating Appliances

With the implementation of the Inflation Reduction Act of 2022, Congress has created a $600 consumer income tax credit for the installation of renewable fuels compatible liquid fuel appliances. With this act, low-carbon liquid fuel heating appliances have been identified as a viable path for GHG reductions.

The heating appliance qualifies by meeting three conditions:
  1. Placed into service after December 31, 2022
  2. Meets or exceeds Energy Star 2021 (boilers and furnaces) efficiency criteria
  3. Rated by the manufacturer for use with fuel blends at least 20% of the volume of which consists of an eligible fuel (eligible fuel: biodiesel or renewable diesel)

If your liquid fuel fired appliances meet these qualifications, homeowners can claim the credit using IRS Form 5695 Residential Energy Credits. Form 5926 is being updated by the IRS and should be available early in 2023.

About the tax credits, Michael Devine, NORA President said. "The Inflation Reduction Act of 2022 is perhaps the most important environmental legislation since the Clean Air Act more than fifty years ago. The inclusion of biofuel powered liquid fuel appliances for homeowner Federal tax credits,displays validation by Congress for the inclusion of these appliances in our pursuit to eliminate carbon emissions from homes. This industry took up the quest many years ago with the introduction of the Advanced Biofuel -biodiesel, into home heating fuel. Today, millions of homes are using biodiesel in ever increasing blends."

Of course, the homeowner needs to be made aware of the credit’s availability. NORA suggests that manufacturers include this information to their supply chain, installers and the homeowner via product marketing, installation manuals and perhaps consumer literature. Retail installers also need to inform their customers of this opportunity to reduce their carbon impact while saving money.

The inclusion of this credit in the tax code is the result of a coordinated effort by many in the liquid fuel heating industry, particularly the National Energy & Fuels Institute with consultation from the Oilheat Manufacturers Association.

Now let’s see what else you can do to improve on your home’s energy efficiency and reduce your heating costs.


  • Vacuum registers and vents regularly, so they move heat more efficiently.
  • Move furniture and drapes that may be blocking heat sources, allowing the heat to move more easily.
  • Close curtains and blinds at night to keep the cold air out, but open them during the day to let the warm sun in.
  • Keep closet doors closed. Closets don’t need to be at the same temperature as the main rooms of your home.
  • If you have rooms that you only use occasionally, like a guest room, close and seal off the vents in those rooms. This will direct the flow of air to the rooms you use most.
  • Move quickly in and out of your home. Each time you open the door, cold air is entering your home and the heat inside is rushing out.
  • Wash your clothes in cold water and only wash full loads of clothes.
  • In cool months, run your fan in a clockwise direction to push the heat down from the ceiling.
  • Turn your thermostat down during sleeping hours. Consider investing in flannel sheets and a warm comforter for your bed to keep you warm at night.



  • Schedule a heating system efficiency check at least once a year. Improving the efficiency of your heating system by a couple of percent points can bring significant cost savings.
  • Seal air leaks around windows and doors with stripping and caulking. It will help reduce the heat that you may be losing, while also making your home more comfortable.
  • Install insulating window treatments. Cellular and honeycomb shades will help you reduce heat loss.
  • Clean or change filters regularly. A dirty furnace will slow down air flow and make the system work harder to keep your home warm.
  • Electrical outlets and switches on exterior walls can be very drafty because insulation isn't always placed behind and around them correctly. To stop the leaks, remove the cover plates and fill small gaps around the boxes with acrylic latex caulk.
  • Insulate pipes on or near outer walls with foam-rubber pipe insulation. Not only will it keep the warm air in, it will keep mice and insects out.



  • Insulate, insulate, insulate! Have a professional evaluate your exterior walls, crawl spaces, attic and ceilings to see if your home has the recommended amount of insulation.
  • Have a programmable thermostat installed. It can adjust your home’s temperature throughout the day, lowering the temperature when you’re not there and bringing it back up so it is nice and comfortable when you arrive.
  • Upgrading to a new heating system is perhaps the best way to save money on your energy bill. Today’s systems are cleaner, quieter, heat your home more evenly and take up a fraction of the space than an older system. A new system can increase the value of your home, too!

    The UPGRADE AND SAVE - Connecticut Energy Efficiency and Safety Rebate offers Connecticut homeowners up to $650* when they install new, higher-efficiency oil-fired furnaces or boilers or a new aboveground oil storage tank. Learn More->
  • Add storm doors to your home. This outer door is a defense against wind by trapping air between the doors, an effective insulation barrier.
  • Certain trees and shrubs can block winter winds and help reduce wind chill. A landscaping professional should be able to guide you based on the size and terrain of your property.
  • Reduce your heat loss from the fireplace. Have a professional check your fireplace and chimney to ensure you are not losing excessive heat when not in use.
  • Replacing your windows can greatly improve energy efficiency. In the cooler months, new windows will help keep the cold air out of your home and the heat in.