How 2025 furnace incentives work (quick map)
Think of rebates and credits as three buckets: federal, state, and utility. Federal incentives set the baseline: in 2025, qualifying gas furnaces earn 30% of project cost, up to $600 when they meet ENERGY STAR and 97% AFUE. Electric furnaces don’t get a direct federal credit, but heat pumps and electrical upgrades do, so hybrid projects can unlock bigger dollars. States add their own programs often rewarding efficiency and electrification and local utilities typically offer $200–$800+ for qualifying gear and smart thermostat add-ons. To maximize savings, bundle upgrades, confirm eligibility before purchase, and keep documentation tight.
If you’re shopping equipment, browse our furnaces and heat pump systems, then use our Sizing Guide to right-size the system to your home.
Gas furnace rebates & credits: what qualifies in 2025
For gas furnaces, the key numbers are ENERGY STAR and 97% AFUE or higher. Hit those and you’re eligible for a 30% federal credit up to $600 on equipment and certain installation costs, as long as the system was installed between Jan 1, 2023 and Dec 31, 2025. You’ll claim it using IRS Form 5695 at tax time. Beyond federal, many utilities still pay $200–$800+ for qualified replacements, and some states add $200–$1,000+ on top. Pro tip from the field: document model numbers, AFUE rating, ENERGY STAR certificate, and paid invoices. Inspectors and rebate processors want clean paperwork. Need gear options? Check our R-32 AC & Gas Furnace bundles and packaged units if you’re simplifying outdoor/indoor footprints. Always confirm your utility’s approved list before you buy.
Electric furnaces: where the savings really come from
A basic electric resistance furnace typically doesn’t qualify for a standalone federal credit. The savings come indirectly: projects that include electrical panel upgrades, insulation/air sealing, or best of all a heat pump can unlock incentives. Under today’s rules, pairing an electric furnace with a heat pump (hybrid system) can earn 30% up to $2,000 in federal credits on the heat pump portion. If your electric service needs an upgrade, income-based programs such as HEEHRA can offer panel rebates up to $4,000. Many utilities also incentivize demand management (think smart thermostats and off-peak control). If you’re leaning electric, explore air handlers and R-32 heat pump systems. Tip: make sure your contractor verifies ampacity, breaker sizing, and wire gauge that’s where projects get tripped up.
Hybrid setups (electric furnace + heat pump): the sweet spot
Hybrid (aka dual-fuel or add-on heat pump) can be the best value in 2025. The heat pump handles most heating hours efficiently; the electric furnace (or existing gas furnace in some dual-fuel designs) covers very cold snaps. This mix can qualify for 30% up to $2,000 on the heat pump, with state/utility adders for electrification. In mild to moderate climates, hybrids cut operating costs and reduce carbon without forcing a full service upgrade right away. Field tip: size the heat pump to carry ~90–95% of your design load; let auxiliary heat cover the worst days. Pair with a smart thermostat to control switchover temperatures.
Browse ductless mini-splits and packaged dual-fuel options if you prefer all-in-one solutions.
Stack and sequence your upgrades for maximum dollars back
Stacking is legal and smart. A common winning sequence: air seal/insulate → right-size equipment → add heat pump → upgrade panel if needed → smart thermostat. Submit state/utility applications early (many are first-come, first-served). Keep permit copies, AHRI certificates, load calcs (Manual J), commissioning reports, and photos of nameplates. For federal credits, save receipts and fill Form 5695 with your tax preparer. If you’re replacing a gas furnace now but planning a heat pump later, choose a coil/air handler that’s heat-pump ready. Our Design Center can help you plan the sequence, and Financing can bridge timing so you don’t miss limited-time rebates.
Finding your state and utility rebates fast
Start with your state energy office and your electric/gas utility. Programs often reward: high-efficiency furnaces, heat pumps, smart thermostats, weatherization, and demand response. Examples you’ll see in the wild: California TECH Clean Electrification, NYSERDA Clean Heat (NY), Mass Save (MA), and Efficiency Vermont. Many utilities publish qualified product lists and require pre-approval for bigger ticket items like service upgrades. Screenshot the program page, save PDFs, and note application deadlines. If you need system ideas first, skim our HVAC Tips, then browse R-32 packaged systems or mini-splits to see what fits your layout. When in doubt, call your utility’s rebate line and confirm model eligibility before purchasing.
Choose qualifying equipment like a pro
For gas: target 97%+ AFUE and ENERGY STAR certification. For electric/hybrid: pick inverter heat pumps with strong cold-climate ratings if you see sub-freezing temps. Always match AHRI-certified combinations (outdoor + indoor + coil) to avoid paperwork headaches. Do a Manual J load calculation oversizing kills comfort and can void rebates. Verify duct static pressure and correct with duct sealing, balancing, or return upgrades. Add a smart thermostat if your utility offers a bonus. Shopping? Compare R-32 AC & coils, through-the-wall units for room-by-room fixes, or packaged units for rooftop/mechanical pads. Keep model numbers consistent across quotes so rebate processors can match them easily.
Install & documentation: what programs look for
Rebate reviewers check three things: did you install the right equipment, was it installed correctly, and can they verify it? The cleanest packages include: permit number, paid invoice, installer license, AHRI certificate, photos of the nameplate, combustion/commissioning readings (gas), and refrigerant charge/subcool/superheat data (heat pumps). Electric projects should include panel size, breaker/gauge, and permit inspection sign-off. Keep everything together for tax time (Form 5695). Ask your contractor to note AFUE/ENERGY STAR on the invoice for gas furnaces, and heat pump model & HSPF/COP on hybrid installs. Need help corralling paperwork? Start a folder and use our Help Center or Contact Us if you get stuck.
Real-life savings examples (ballpark math)
Example A High-efficiency gas furnace: You replace an 80% unit with a 97%+ AFUE furnace. Federal: 30% credit up to $600 (most folks hit the $600 cap). Utility: say $400. State: perhaps $500. That’s ~$1,500 off typical project costs, plus lower gas bills from higher efficiency.
Example B Electric + heat pump hybrid: You add a heat pump with an electric furnace backup. Federal: 30% up to $2,000 (heat pump). Income-based panel rebate: up to $4,000 if you qualify. Utility/State: often $500–$1,500+ combined. It’s common to see $2,500–$5,500 back on well-planned hybrid projects.
Common mistakes that kill rebates
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Buying the wrong model: not ENERGY STAR or <97% AFUE for gas.
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No AHRI match: mixing components that aren’t certified together.
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Skipping permits/inspections: most programs require them.
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DIY installs: professional installation is required for nearly all incentives.
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Missing deadlines: some programs close early; apply immediately after install.
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Wrong sizing: oversizing leads to short cycling and fails QA.
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Paperwork gaps: missing invoices, model numbers, or photos.
Avoid surprises: get a written scope listing model numbers, AFUE/efficiency ratings, and who files which rebate. If you need a second opinion on equipment fit, our Quote by Photo tool can sanity-check your plan.
FAQ: Furnace rebates (Gas vs. Electric) in 2025
Do all gas furnaces qualify for the $600 federal credit?
No. It must be ENERGY STAR and 97% AFUE or higher, installed by 12/31/2025, and claimed on Form 5695.
My electric furnace doesn’t qualify—am I out of luck?
Not necessarily. Pair it with a heat pump for 30% up to $2,000, and check income-based rebates for panel upgrades up to $4,000.
Can I combine federal, state, and utility incentives?
Yes, stacking is common. Watch for pre-approval and deadline rules from your state/utility.
What paperwork do I need?
Paid invoices, permits, AHRI certificate, ENERGY STAR/AFUE proof, nameplate photos, and your Form 5695 at tax time.
Are rebates better for gas or electric?
Gas has a guaranteed federal path (if 97%+ AFUE). Electric shines when paired with a heat pump and, if eligible, panel rebates—often the bigger total.
How do I pick the right size system?
Get a Manual J load calc and use our Sizing Guide. Oversizing hurts comfort and rebates.
Where can I get help choosing equipment?
Browse our collections, then use the Design Center or Contact Us for expert guidance.
