Get Your Furnace Tax Credit Now

Consumer Tax Incentives

Home Heating & Cooling Equipment

What are the incentives for home heating & cooling equipment?

Purchasers of highly efficient heating, cooling, and water heating equipment can take tax credits of 30% of installed cost for purchasing qualifying equipment, as detailed below. These credits are available for systems placed in service from January 1, 2009, through December 31, 2010. There is a $1,500 cap on the credit per home, including the amount received for insulation, windows, air and duct sealing.

What types of equipment qualify?

  • High-efficiency gas, oil, and propane furnaces and boilers
  • High-efficiency central air conditioning units, including air-source heat pumps
  • NEW – Ground-source or geothermal heat pumps
  • NEW – Biomass Stoves
  • High-efficiency fans for heating and cooling systems
  • High-efficiency water heaters, including heat pump water heaters

What are the efficiency requirements to qualify for the credits?

Manufacturers and retailers should be able to help you tell whether a specific product qualifies.

The qualification specifications are:

  • Furnaces and Boilers: Natural gas & propane furnaces must meet an Annual Fuel Use Efficiency (AFUE) 95 or higher, oil furnaces and gas, oil and propane boilers must meet an AFUE of 90 or better.
  • Central Air Conditioning Units: Central air conditioning units and air-source heat pumps must meet the highest tier standards set by the Consortium for Energy Efficiency (CEE) as of January 1, 2009, which in most cases requires a Seasonal Energy Efficiency Ratio (SEER) of 16. SEER measures performance throughout the cooling season.
  • Biomass Stoves: Stoves must have a thermal efficiency of 75% as measured using a lower heating value, and be used to heat a dwelling unit or heat water for use in the same. The law defines biomass fuel as anything from agricultural crops, trees, wood wastes & residues to pellets, plants, grasses and fibers.
  • While the new tax credit takes effect immediately, the Internal Revenue Service has not issued the guidelines for determining which stoves meet the efficiency requirements to qualify for the credit or how a manufacturer will qualify their products. These guidelines are expected by the later part of May 2009, however the credit applies to all qualifying stoves sold in 2009. Once the IRS guidelines are issued, wood and pellet stove manufacturers will test their stoves and will notify their retailers regarding which models qualify.
  • Fans for heating and cooling systems: fan uses no more than 2% of total heating system energy use, as defined by DOE test procedure. For more information, see the Air-Conditioning, Heating and Refrigeration Institute website . It is still unclear how the 2009 Stimulus legislation has impacted this incentive – it seems reasonable to assume that the cost basis will be the reasonable cost of the fan, not the entire furnace. IRS has yet to issue specific guidance on this issue.

Water Heaters:

  • Gas or propane water heaters – Energy Factor of at least 0.82, or a thermal efficiency of at least 90%.
  • Heat pump water heaters – Energy Factor of at least 2.0

Where must the equipment be used?

Under guidance issued by the IRS, equipment is eligible if installed in a home occupied by a taxpayer as their principal residence at the time the equipment is installed. This implies that equipment in new homes is generally not eligible since in new homes equipment is generally installed prior to occupancy. However, efficient equipment in new homes can help that home qualify for the new home tax credit.

What do I need to do to qualify for the incentives?

Under the IRS rules, manufacturers need to certify that specific measures are eligible. Homeowners should obtain a copy of this certification when buying these products from the manufacturer, contractor or retailer. Certifications need not be submitted to the IRS, but should be kept on file in case the IRS has questions. Homeowners should also make notes on when each eligible measure is installed- only measures “placed in service” in 2009 or 2010 are eligible.

Where can I find out more about qualifying products?

Central Air Conditioning Units and Heat Pumps: Information on qualifying equipment can be found at the Consortium for Energy Efficiency web site. ACEEE and DOE also have general information.

Biomass Stoves

Fans for Heating and Cooling Systems:

Water Heaters:

Information on which equipment meets the required Energy Factor levels can be found in a directory published by AHRI. More general information can be found on the ACEEE and DOE websites:

How to file a tax credit

Certain products that promote energy efficiency are eligible for tax credits from the federal government. You can claim the tax credit when filing your income tax return. A tax credit is a dollar-for-dollar amount that you receive from the government. This is different from a tax deduction, which reduces your tax liability by the amount to be deducted. The February 2009 stimulus bill provides increased tax credits for energy-efficient products, including furnaces, windows, heaters, solar panels and wind energy systems.

Difficulty: Moderately Easy


  1. Shop around and confirm eligibility. If you have not purchased your furnace yet, shop around to make sure that what you plan on buying is not just Energy-Star labeled, but also meets the specific energy-efficiency criteria to qualify for the tax credit. See the first link in Resources for these government-required specifications. If you have already purchased your furnace and it does not meet the requirements, you will not qualify for a tax credit.
  2. Keep good records. You will need your purchase receipt, as well as a manufacturer’s certification statement, to claim a tax credit when you file your income tax return. Make sure to get the certification statement when you buy your furnace.
  3. Familiarize yourself with the rules for claiming a tax credit for a furnace purchase. Based on the new stimulus bill that was signed into law by President Obama in February 2009, you can claim a tax credit of 30 percent of the purchase price of your eligible energy-efficient product up to a maximum of $1,500 until 2010 (2016 for some products; some products have no upper limit). If your furnace was installed in 2008, you are not eligible for a tax credit; however, furnaces installed in 2009 are once again eligible if they meet the efficiency criteria. Furnaces installed in 2006 and 2007 are eligible, and if you did not claim a tax credit, you can file an amendment to your tax return for the applicable year. See the second link in Resources for all energy-efficiency tax credits available.
  4. When filing your taxes, you will need IRS form 5695. You can easily find this form online. Make sure you use the most up-to-date version. See the link in Resources for the current version. Fill it out properly by following the instructions.
  5. Use tax-filing software at tax time. The best way to claim your tax credit is to use tax-filing software. You just need to answer the appropriate questions, and the software will automatically prepare the appropriate IRS forms. Also, bear in mind that tax-filing software is updated periodically to be in line with up-to-date government regulations.

Why Is My Furnace Leaking Water?

As the temperature begins to dip, one of the last things you want is to have issues with your furnace. If you begin to see water forming around the unit, you may start to worry and wonder what’s happening. Usually, this signifies that something...

Why Is My Furnace Leaking Water?

As the temperature begins to dip, one of the last things you want is to have issues with your furnace. If you begin to see water forming around the unit, you may start to worry and wonder what’s happening. Usually, this signifies that something...

Reasons Your Furnace Isn’t Blowing Out Hot Air

It’s the middle of winter and you’re trying to warm up. You check to make sure all the windows are closed, there are no drafts or cracks allowing cold air to escape in. It’s still cold in your home. What’s the issue then? The...

Why Isn’t My Hot Water Hot?

One of the worst feelings is stepping into a shower–only to find out there’s cold water pouring out. Without reliable hot water, you can’t shower, wash your dishes, or carry out any number of other activities that involve water. Here are a couple reasons as...

Common Furnace Malfunctions

The only time you need your furnace is when the weather cold (or frigid!). At those times, the furnace may stop working at 1:00 am, you wake up with goosebumps, become desperate for warmth, and you don't know how to troubleshoot the furnace problem. Common furnace...

Why You Should Inspect Your AC Unit At The End Of The Season

Central air conditioners are connected to many homes for cool air during summer or warm air during the winter. Therefore, the cooling and heating systems require regular maintenance to check for any malfunctions before you begin the next season of air conditioning within your...

Common Boiler Malfunctions

Many people do not give much thought to the central heating system.  People expect it to work when they need it and for it to continue pumping out a continous supply of hot water. However, if there is a fault, or the boiler is malfunctioning, it...

Why Does My AC Keep Running?

When an air conditioning unit is constantly running, it is not only blowing money, but it's a sign that something isn't right with the unit. An air conditioner should kick on and off automatically unless there is an issue. An air conditioner that runs...

What Are The Most Common AC Malfunctions?

Your home air conditioner is one of the most important appliances in your home. While air conditioners that are well-maintained can last for a long time, it always seems as if they malfunction at the worst possible times. Fortunately, many of the reasons for...

Why Is My AC Unit Not Cooling Down My Home?

If you are experiencing higher temperatures in your home than set on your thermostat, it can make your stay frustrating and uncomfortable. The problem might be simple or it might mean you need a new AC unit. Why is your AC not cooling the...

How To Safely Clean Your AC Unit

One of the easiest ways to extend the life of your AC unit as well as to ease the task of maintenance is to make sure the AC unit is clean. A clean air conditioning unit will also allow your home to be cooled...

Common Air Conditioning Malfunctions

As the temperature rises on the outside, you want the temperature to drop on the inside. One of the worse things that can happen on a sweltering summer day is a malfunctioning AC unit, causing you and your family discomfort. Below are just a few issues that...

HVAC License-Dangers and Risks

Are you putting your family in Danger?
Do you know if your contractor has an HVAC License?  You would think the question of possessing the proper HVAC license would be an easy one to answer.  Ha!  Not here in Michigan, just visit-  LARA –...

Breath Better, Live Healthier with quality air filters

Furnace or Air Condition Filters for Health and Savings
When you have a central furnace and air conditioning system, air quality often becomes an issue, affecting how you breathe, your health and the basic quality of life indoors.  These types of systems use...

Is Your Air-Conditioning System Ready for Warm Weather?

Is Your Air-Conditioning System Ready for Warm Weather?
This is the focus I’ll be tackling here on this post, enjoy.
While cooling is essential for facility comfort and productivity, it accounts for nearly 15 percent of the electricity used in residential homes...

Ductless Split-System Heat Pumps (Mini-Splits)

 This article is reproduced from the U.S. Department of Energy Website.??Ductless split-system heat pumps (mini splits) make good retrofit add-ons to houses with “non-ducted” heating systems, such as hydronic (hot water heat), radiant panels, and space heaters (wood, kerosene, propane). They can also be...

Moisture, Mold and Mildew Control in the Home

Key Points

Mold and mildew can cause discoloration, odor problems and the degradation of building materials.
Moisture control is the most important strategy for reducing the growth of mold and mildew.
Thermal bridges, windows and wall cavities are common areas...

Ten Ways to Improve Heating System Performance

Key Points

Optimizing heating system performance can save on energy costs and improve building comfort.
Regular maintenance and efficiency upgrades can keep your system operating at peak efficiency.
If your system is 15 years old or older, consider installing...

Refrigerant Battle of the 21st century

R22 vs R410, Why the Big Scare.
Today 5/9/2017
I would like to start by saying this is an update from 2012. Since this article was posted a few thing have changed. The biggest change has been the cost of the R-22, it...

Heating Tax Credits for 2011

$500 -- 2011 HVAC Energy Tax Credit
Although not as aggressive as the past two years of energy tax credits, the new round of tax credits are here for 2011.
When an aging or unreliable comfort system is due for repair, it...