I think you are making the right decision on the larger unit. As for the credit I copied it an put below. I also referenced the old name of the credit and I added the part also as the new one doesn't seem to mention biomass products as eligible. But at the bottom it looks as if there is a $2000 per year cap on a new biomass stove or boiler as well as some heat pump units.
How It Works
The Residential Clean Energy Credit equals 30% of the
costs of new, qualified clean energy property for your home installed anytime from 2022 through 2032. The credit percentage rate phases down to 26 percent for property placed in service in 2033 and 22 percent for property placed in service in 2034. You may be able to take the credit if you made energy saving improvements to your home located in the United States.
The credit is nonrefundable, so the credit amount you receive can't exceed the amount you owe in tax. You can carry forward any excess unused credit, though, and apply it to reduce the tax you owe in future years. Do not include interest paid including loan origination fees.
The credit has no annual or lifetime dollar limit except for
credit limits for fuel cell property. You can claim the annual credit every year that you install eligible property until the credit begins to phase out in 2033.
Referenced in the above.
What’s New
Residential clean energy credit.
The residential clean energy credit added a credit for qualified battery storage technology. Battery storage technology costs are allowed for the residential clean energy credit for expenses paid after December 31, 2022. See
Qualified battery storage technology costs, later, for details.
Biomass fuel property costs are no longer allowed for the Residential Clean Energy Credit for property placed in service after December 31, 2022.
Energy efficient home improvement credit.
The energy efficient home improvement credit is now divided into two sections to differentiate between qualified energy efficiency improvements and residential energy property expenditures.
For the energy efficient home improvement credit, the lifetime limitation has been replaced by an annual credit limit. A 30% credit, up to a maximum of $1,200, may be allowed for:
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Insulation material or air sealing material or systems,
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Exterior doors,
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Windows and skylights,
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Central air conditioners,
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Natural gas, propane or oil water heaters,
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Natural gas, propane or oil furnaces or hot water boilers,
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Improvements or replacement of panelboards, subpanelboards, branch circuits or feeders, and
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Home energy audits.
The limits for each category of these items that qualify for a credit is discussed later in
Section A—Qualified Energy Efficiency Improvements.
Heat pumps and heat pump water heaters, biomass stoves and biomass boilers have a separate annual credit limit of $2,000 with no lifetime limitation, which replaces the prior lifetime limitation of $500.
