You can claim a federal tax credit of 30% of the cost (including installation), up to a maximum of $600, for a new high-efficiency furnace installed in 2025.
This credit is part of the Energy Efficient Home Improvement Credit and is available through December 31, 2025.
Eligibility Requirements
To qualify for the tax credit, both you and the furnace must meet specific criteria:
- Primary Residence: The furnace must be installed in your main home located in the United States. Rental properties or second homes generally do not qualify (except for specific clean energy property credits).
- New Equipment: The furnace must be new and installed as the original use.
- Efficiency Standards: The furnace must be ENERGY STAR certified and meet or exceed the Consortium for Energy Efficiency (CEE) highest efficiency tier in effect at the beginning of the year of installation. For gas furnaces, this typically means an Annual Fuel Utilization Efficiency (AFUE) of 97% or higher.
- Documentation: You must obtain a manufacturer’s certification statement and, for installations in 2025, a unique Product Identification Number (PIN) / Qualified Manufacturer Identification Number (QMID), which must be reported on your tax return.
Claiming the Credit
The tax credit is nonrefundable, meaning it can reduce your tax liability to zero but cannot generate a refund check for any excess amount.
- Purchase and Install: Ensure the qualifying furnace is installed by December 31, 2025.
- Gather Documentation: Keep all receipts, invoices, and the manufacturer’s certification statement with the QMID/PIN.
- Complete IRS Form 5695: You will use Part II of IRS Form 5695 (Residential Energy Credits) to claim the credit when you file your federal income tax return for the year the furnace was installed (i.e., your 2025 taxes filed in 2026).
Maximizing Your Savings
The furnace tax credit falls under a larger annual limit of $1,200 for most energy efficiency improvements or an overall total of $3,200 per year when combined with the separate $2,000 limit for items like heat pumps or biomass stoves.
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You can combine the furnace credit with other qualifying upgrades (e.g., insulation, windows, doors, or electrical panel upgrades) within the annual limits.
You can also check the DSIREUSA.org database for additional state and local utility rebates or incentives that may be available in your area.
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