The federal furnace tax credit does not cover a 2026 install

On its FAQ for Public Law 119-21, enacted July 4, 2025, the IRS says the section 25C energy efficient home improvement credit will not be allowed for any property placed in service after December 31, 2025. A furnace installed in 2026 falls under that sentence.

What changes

The credit page, last reviewed April 28, 2026, describes the credit for qualifying property placed in service on or after January 1, 2023, and before December 31, 2025. It lists natural gas, propane, or oil furnaces and hot water boilers as residential energy property, up to $600 per item when they meet the efficiency tier named on that page. Labor for that equipment may count. Heat pumps that meet the page's tier are a separate cap, up to $2,000 a year. The page says to claim the credit on Form 5695 for the tax year the property is installed, not the year it was only purchased.

The FAQ explains the change. For section 25C it says the credit will not be allowed for any property placed in service after December 31, 2025. A furnace, boiler, or heat pump placed in service in 2026 is after that date.

The credit page says the credit covered property placed in service "before December 31, 2025." The FAQ says it is not allowed "after December 31, 2025." Either way, a furnace installed in 2026 does not qualify.

Who it affects

The credit page says you may claim the credit for improvements to your main home in the United States. The home has to be an existing home you improve, not a new home. In most cases it has to be your primary residence. A landlord who does not live in the home cannot claim it. If the home is used partly for business, the page splits the credit once business use passes 20 percent. The credit is nonrefundable. You cannot get back more than you owe in taxes, and you cannot carry an unused amount to a later year.

For property placed in service in 2025, the page says no credit is allowed unless a qualified manufacturer produced the item and you report the qualified manufacturer identification number on the return. Insulation and air sealing are the exception it names.

What you still owe or still need to do

A utility rebate is not this credit. ComfortSystems, Minnesota Energy Resources, MidAmerican, and Heartland publish their own programs. What furnace rebates can I get in 2026? keeps those separate, including the fact that Sioux Falls' published rebates are for electric heat pumps, not gas furnaces.

The credit page also says public utility subsidies for buying or installing the property are subtracted from qualified expenses, whether the money comes to you or to a contractor.

What to do now

If the furnace is going in during 2026, do not plan on a section 25C credit. Get the utility's current rebate sheet, and get a written price from the company doing the work. If a furnace was placed in service in 2025 and you have not filed, the credit page is the one that describes Form 5695, the manufacturer number, and who may claim it. This site does not prepare the return.

Pages we updated

The same cutoff is stated on What to do when the furnace is not working and What furnace rebates can I get in 2026?. Rochester keeps the Minnesota Energy Resources bonus dates, which are a utility program with their own end date.