This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032. Claim the credits using the IRS Form 5695 .
Energy Efficient Home Improvement Credit
These expenses may qualify if they meet requirements detailed on energy.gov: Exterior doors, windows, skylights and insulation materials. Central air conditioners, water heaters, furnaces, boilers and heat pumps.
Income-qualified, single-family homeowners may receive rebates of up to $8,000 to reduce the cost of purchasing and installing a new, energy-efficient home heating and cooling heat pump.
Income-eligible owners of single-family homes (including manufactured or mobile homes, duplexes, and other properties with four or fewer residential units) who either live in the home or rent the home to an income-qualified household. Owners of multifamily properties with five or more residential units.
Apply for a grant
The Federal Low Income Home Energy Assistance Program (LIHEAP) helps low-income Americans with heating and cooling expenses. Apart from small grants, LIHEAP offices also help consumers find resources to help pay for the cost of replacing furnaces and air conditioners.
The overall total limit for an efficiency tax credit in one year is $3,200. This breaks down to a total limit of $1,200 for any combination of home envelope improvements (windows/doors/skylights, insulation, electrical) plus furnaces, boilers and central air conditioners.
A new furnace costs $4,799 on average, but the final total for parts and labor will depend on type of furnace, size of your home, and other factors, like efficiency and brand. Rates may range from $150 to $13,100.
Ducted AC Split Systems (or Mixed Ducted and Non-Ducted)
Individuals who purchase and place into service qualifying equipment between January 1, 2024, and December 31, 2024 may qualify for a non-refundable tax credit of up to $600 per system, subject to an annual limit of $1200 per taxpayer.
The Inflation Reduction Act allocates $8.8 billion in total funding for consumers who make their homes more energy efficient. Consumers can access up to $14,000 or more per household, and perhaps more in some states depending on the design of the program.
The inflation relief payments are based on your 2020 taxes, and in order to qualify you need to have filed your 2020 taxes by the extended deadline of Oct. 15, 2021, according to the Franchise Tax Board. If you were late on your taxes and filed after Oct. 15, you generally do not qualify.
The Inflation Reduction Act provides home appliance rebates for discounts on electric energy-efficient appliances like Induction cooktops, ranges and heat pump laundry appliances. Sign up to be notified when rebates are available in your state.
Who is now eligible for a $1,400 payment? The IRS plans to issue about $2.4 billion in automatic payments to eligible individuals who did not claim the Recovery Rebate Credit on their 2021 tax returns. The maximum payment is $1,400 per individual, or $2,800 per married couple.
No income requirements. There are no income limitations for the 25C Tax Credit — but like nearly all federal tax credits, you can only use it if you pay federal income taxes, and the amount you can receive is limited by the amount of federal income tax you pay in a year.
The Average Furnace Lifespan
A well-maintained furnace can last at least 15 to 20 years, but completing annual maintenance and being diligent with repairs can extend its life even longer.
What products are eligible? Effective January 1, 2025, split system central air conditioners must meet SEER2 ≥ 17.0 and EER2 ≥12.0 to be eligible. Packaged central air conditioners must meet SEER2 ≥16.0 and EER2 ≥11.5 to be eligible.
Certified gas furnaces in the northern half of the U.S. will be labeled with the standard ENERGY STAR logo. These furnaces will be up to 15 percent more energy efficient than baseline models and can save $80 a year, in energy costs.
The Inflation Reduction Act of 2022 provides tax credits and point-of-sale rebates that can equal thousands of dollars for the installation of high-efficiency HVAC equipment. The Inflation Reduction Act provides tax credit incentives for homeowners replacing aging equipment with high-efficiency HVAC systems!
All applicants must have an active SAM.gov and Grants.gov registration in order to apply for a grant under the Inflation Reduction Act (IRA). You should register in these systems now if you think you may apply for a federal grant. The process can take a month or more for new registrants.
Qualifying Households:
Low-income households (<80% of their Area Median Income (AMI): 100% rebate of the purchase and installation costs for qualified electrification projects. Moderate-income households (80-150% of their Area Median Income): 50% rebate of the cost of home electrification projects.
The IRS offers several ways for taxpayers to cut their tax bills through investing in certain energy-efficient appliances and home improvements. This can include upgrades like energy-efficient water heaters, furnaces, air conditioners, and similar investments. To claim the credits, you'll need IRS Form 5695.
An oil, propane or natural gas furnace must "meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year in which the property is placed in service."
File Form 5695, Residential Energy Credits Part II, with your tax return to claim the credit. You must claim the credit for the tax year when the property is installed, not merely purchased.
For people taking a proactive approach, doing a furnace replacement during the “shoulder seasons” of spring and autumn may offer lower prices, shorter lead times, and a better selection of products and service appointment availability.
A standard policy typically won't cover the cost to replace your furnace if there was a mechanical problem, but you may be able to add an equipment breakdown endorsement for an additional cost that may provide coverage.