Furnace Tax Credit: How to Maximize Your Savings in 2025
The Energy Efficient Home Improvement Credit provides homeowners with a valuable opportunity to reduce their tax burden while upgrading their home’s comfort systems. In 2025, qualifying Carrier furnaces may be eligible for an energy tax credit of up to $600, as part of a broader annual limit of $2,000 under the Inflation Reduction Act. This furnace tax credit applies to ENERGY STAR® certified systems purchased and installed between January 1, 2023, and December 31, 2032, and encourages investments in energy efficient home improvement. Homeowners who upgrade now can benefit from long-term energy savings and federal incentives.
Understanding the Tax Credit for a New Furnace
The tax credit for a new furnace falls under the Energy Efficient Home Improvement Credit, designed to reward homeowners for upgrading to energy-efficient systems. It is part of the broader effort to reduce household emissions through residential clean energy initiatives. This program allows homeowners to claim energy credits based on qualifying installations, including home energy audits, and provides credit amounts capped annually (e.g., $600 for qualified furnaces). For more on Carrier's commitment to efficiency, visit our energy efficiency page.
What Furnaces Qualify for the Energy Efficient Tax Credit?
To qualify for the tax credit, a furnace must meet ENERGY STAR® certification and comply with the Consortium for Energy Efficiency (CEE) Tier II efficiency standards. Homeowners must also ensure the furnace is installed in a primary residence—not a rental or solely business-used property—to be eligible. Those who qualify can claim the credit on their tax return as part of their residential clean energy improvements. Learn more about available rebates and offers on our rebates and incentives page.
Gas Furnace
ENERGY STAR certified gas furnaces with an AFUE ≥ 97% qualify for the federal tax credit when fueled by natural gas, propane, or oil. See eligible Carrier models on our furnaces page.
Oil Furnaces
To qualify, oil furnaces must meet ENERGY STAR criteria and operate on eligible fuels like oil or propane. See details on qualifying products on our furnaces page.
How to Claim the High-Efficiency Furnace Tax Credit on Your Tax Return
To claim the efficient home improvement credit, homeowners must complete IRS Form 5695 and submit it with their federal tax return. Be sure to keep all receipts, equipment certifications, and product identification numbers (PINs) from qualified manufacturers. Note that the overall annual credit limit is $3,200, with a $600 cap for qualified furnaces. To maximize your benefits, consider coordinating installation timelines and pairing upgrades. For more savings ideas, visit our energy savings page.
Additional Tax Credit Opportunities to Combine with Your Furnace Upgrade
Homeowners can increase their tax savings by combining furnace upgrades with other energy efficient home improvement projects. Consider pairing your new furnace with home energy audits, electric panel upgrades, or heat pump water heaters to maximize rebates and qualify for additional credits. Eligible items also include air sealing materials, windows and skylights, and insulation. Visit our federal tax credits page and explore high-efficiency gas furnaces to start planning.
Common Questions About Furnace Tax Credits
Several systems qualify under the Inflation Reduction Act, including:
- Gas Furnaces (AFUE ≥ 97%)
- Heat Pumps (Air source and mini splits)
- Central Air Conditioners
- Home Energy Audits
Learn more about the Inflation Reduction Act.
Contact a Carrier Professional for All Your HVAC Needs
For personalized guidance on qualifying systems, tax incentives, and installation options, contact your local Carrier expert. They’ll help you choose an energy-efficient furnace that fits your home—and your budget—while maximizing your potential tax credit savings.
Disclaimer: The information provided herein is for informational purposes only and is not intended to be construed as legal, financial, or tax advice. You should consult your own tax advisor or other qualified professional for your specific legal, financial, or tax needs.
