Yes, you can claim tax credits for a new, high-efficiency furnace and air conditioner under the Inflation Reduction Act (IRA) through 2032. You can receive a 30% tax credit on costs, up to a maximum of $600 for a qualified central AC and $600 for a qualified furnace ($1,200-$3,200 annual cap depending on equipment).
Yes, a new, high-efficiency furnace can qualify for the federal Energy Efficient Home Improvement Tax Credit (25C), offering up to $600 (30% of costs, including labor) through 2025 for gas, propane, or oil furnaces that meet strict energy efficiency standards set by the Consortium for Energy Efficiency (CEE) and often certified by ENERGY STAR, requiring specific AFUE ratings. Homeowners claim this credit by filing IRS Form 5695 with their tax return for the year of installation.
ENERGY STAR certified oil furnaces that use certain fuels are eligible. The equipment must be rated by the manufacturer for use with fuel blends at least 20 percent of the volume of which consists of biodiesel, renewable diesel, or second-generation biofuel.
Eligible home improvements that may qualify for tax deductions
A recent tax law ("One Big Beautiful Bill") introduced a new $6,000 bonus deduction for Americans aged 65 and older, available for tax years 2025-2028, reducing taxable income, not the tax itself, with income phase-outs starting at $75,000 MAGI for singles and $150,000 for joint filers. This deduction adds to existing standard deductions, provides up to $12,000 for couples, and requires a Social Security number and filing status other than Married Filing Separately.
If both units are qualified, you could get a maximum of $2,600 in HVAC tax credits if you installed a qualified heat pump and a gas furnace for a dual-fuel system. If you install a qualified split system where you replace both the AC unit and the furnace at the same time, you could qualify for up to $1,200 in credits.
Eligible systems and components you can claim on your taxes include:
Effective Jan 1, 2023: Provides a tax credit to homeowners equal to 30% of installation costs for the highest efficiency tier products, up to a maximum of $600 for qualified air conditioners and furnaces, and a maximum of $2,000 for qualified heat pumps.
Under the 3½-month rule, a taxpayer may treat economic performance as occurring with respect to a service liability when payment is made, as long as the taxpayer reasonably expects the person providing the services to provide them within 3½ months after the taxpayer makes the payment.
Yes, interest paid on business loans is generally 100% tax-deductible as a business expense. This includes interest on business credit cards, lines of credit, mortgages for business property, and equipment loans.
To qualify as a capital improvement, the IRS states that the property must meet the following conditions: The improvement “substantially adds” value to your home. The improvement prolongs the useful life of the property. The improvement is permanent.
Is generally a restoration to your building property because it's for the replacement of a major component or substantial structural part of the building's HVAC system. Therefore, the furnace replacement is a capital improvement to your residential rental property.
The IRS $600 rule refers to a change in reporting requirements for third-party payment apps (like Venmo, PayPal) for taxable income from goods and services, where platforms must send a Form 1099-K if you receive over $600 in a year, intended to capture gig economy/side hustle income, though delays and phased implementation have adjusted the timeline, with current rules for 2024 using a higher threshold ($5,000) before fully phasing to $600 for future years, but remember all taxable income, regardless of form, must always be reported.
Common tax return mistakes that can cost taxpayers
If you itemize, you can deduct these expenses:
You must be 65 or older by the end of the tax year to qualify for the new senior tax deduction, include your Social Security number on your tax return, and meet the income limits. You can claim the new $6,000 senior tax deduction if you itemize your tax deductions, or if you choose to take the standard deduction.
For those who haven't filed taxes for three years, it's important to act quickly. You risk losing potential tax refunds and credits, as the IRS only allows you to claim a refund for up to three years from the original filing deadline. Beyond this period, any refund owed to you becomes the property of the U.S. Treasury.
State-Specific Deductions
For example, California allows renters to claim a deduction for rent paid on their primary residence, while other states may not.
Taxpayers often make common tax mistakes by omission: not keeping records. If the IRS comes a-knockin', don't be scrambling to compile your records. File or scan and store home office and home improvement receipts and other home-related documents as you go. #7 Forgetting to Report Trackable Capital Gains.
A portion of your utility bills (gas, electric, water) A portion of your rent payments or mortgage interest. Any excess internet and mobile phone usage. Part of your council tax bill.