Yes, costs for installing a new furnace may qualify for the Residential Energy Credit under the Energy Efficient Home Improvement Credit (Part II of Form 5695), but only if the furnace meets specific IRS energy efficiency standards. Eligible property includes certain high-efficiency natural gas, propane, or oil furnaces that meet applicable federal criteria. The credit is equal to 30% of the amount paid or incurred for qualifying property placed in service during 2025, subject to applicable limits.
Eligibility and Credit Limits
- Qualified Property: Only furnaces that meet IRS-required energy efficiency standards qualify as qualified energy property.
- Credit Rate: 30% of the cost paid or incurred for the furnace, including installation.
- Combined Credit Limit: The total credit for all eligible improvements and property is capped at $1,200 for 2025.
- Per-Item Limit: No more than $600 can be claimed for a qualified furnace, and this limit is included within the $1,200 overall cap.
Additional Requirements
- The furnace must be installed in a home located in the United States and used as a residence.
- Only costs for property placed in service during 2025 are eligible.
- Labor costs properly allocable to the installation are included in qualified expenses.
Source:
Form 5695 Instructions (2025)
Disclaimer: Always verify eligibility and requirements with the current IRS Form 5695 and its instructions, as well as your state’s Department of Revenue. Tax rules may vary based on individual circumstances and jurisdiction.