You may have been considering buying a new furnace for a while. Yours might make strange noises when you’re trying to sleep. Perhaps it just doesn’t heat your home like it used to. Or maybe you’ve noticed skyrocketing energy bills.
At Moreau’s Thermal Services, we know a new furnace can be a big financial investment. If you’ve been going back and forth about it, a federal tax credit program could make your decision a little easier. Here, we answer commonly asked questions about the program, such as “Is a new furnace tax deductible?” and “How do I claim the tax credit?”
For more information about furnace installation in Slidell, LA, call us at (985) 777-0076.
What Are Energy Policy Act Tax Credits?
Passed in 2005, the Energy Policy Act provided tax incentives to encourage people to purchase energy-efficient furnaces, fixtures, appliances, and equipment. The government has amended the act several times since then.
Most recently, President Biden signed the Inflation Reduction Act in August 2022, which expanded the credits available. Taking effect on January 1, 2023, the new tax credits run through 2032. The credits are non-refundable, meaning you can use them to offset your tax bill, but you will not receive them as a refund.
What Is the Tax Credit for Furnaces?
Inflation Reduction Act tax credits apply to several energy efficiency upgrades, including solar panels, heat pumps, windows, and insulation. If you’re asking, “Is a new furnace tax deductible?” you’ll be happy to know that you can earn a tax credit for units that meet the following criteria:
- Installed between January 1, 2023, and December 31, 2032
- ENERGY STAR-certified gas furnaces with an annual fuel utilization efficiency (AFUE) of at least 97%
- ENERGY STAR-certified oil furnaces that use certain fuels
You can claim up to 30% of the total project cost, not to exceed the $600 credit maximum.
How Do I Claim a New Furnace on My Taxes?
As a homeowner, you can claim a credit on your energy-efficient furnace by filling out Form 1040 (or 1040NR for non-resident aliens).
To determine your credit amount, complete the Residential Energy Credits Form 5695. This form has two sections: Part I for the Residential Energy Efficient Property Credit and Part II for the Nonbusiness Energy Property Credit. Part II is where you would claim your residential furnace tax credit. Use Line 22b for a “Qualified natural gas, propane, or hot water boiler.”
How Else Can a New Furnace Benefit?
Beyond qualifying you for tax credits, updating your HVAC system offers the following benefits.
Cost Savings
New high-efficiency HVAC systems tend to cost a lot less to operate than older systems. Outdated furnaces may run almost continuously, costing you hundreds of dollars a month in energy bills. A more modern and efficient unit can cut those expenses significantly.
Efficient products are cost-effective when the lifetime energy savings exceed any added upfront cost compared to a less efficient option. When setting required efficiency levels, ENERGY STAR considers upfront costs and lifetime energy savings.
While replacing an old furnace costs more up front, the savings on energy bills and repairs can add up quickly.
Improved Safety
Outdated furnaces can produce unusual odors and lead to poor indoor air quality, which can worsen health conditions like asthma. Old furnaces can even leak carbon monoxide, an odorless and colorless gas that can sicken people in your home—or worse.
All ENERGY STAR furnaces are “condensing” furnaces. In addition to improving energy efficiency, condensing furnaces are safer. Thanks to supply lines, combustion chambers, and flues that are sealed from within homes, condensing furnaces prevent exhaust gases from leaking or back-drafting into occupied areas.
Ready To Upgrade Your Furnace? Call Us Today!
Now that you know a new furnace is tax deductible, what are you waiting for? For more information about when to replace your furnace, or if you’re ready to upgrade now, call Moreau’s Thermal Services at (985) 781-6333.
