Section 25C — the Energy Efficient Home Improvement Credit — was a federal income tax credit for high-efficiency residential heating equipment and building-envelope upgrades. Originally enacted in the Energy Policy Act of 2005, it was expanded by the Inflation Reduction Act of 2022 (IRA), effective for property placed in service starting January 1, 2023. The IRA version paid 30% of project cost up to category caps, with no income limit and no lifetime cap, so a homeowner could claim it in multiple years on different projects.
For furnaces, the relevant cap was $600 for a qualifying high-efficiency gas, oil, or propane furnace or boiler meeting the highest CEE tier in effect at the start of the install year — in practice a gas furnace at roughly 97% AFUE or better. This was a separate cap from the $2,000 heat-pump credit and the $1,200 cap covering insulation, windows, doors, and panel upgrades. A key limitation that surprised many homeowners: the credit applied only to new qualifying equipment. A furnace repair — a new heat exchanger, gas valve, igniter, or control board on an existing furnace — never qualified, no matter how efficient the furnace was; only a full replacement with a credit-tier unit did. The credit was non-refundable, so it could zero out tax owed but not produce a refund on its own.
The One Big Beautiful Bill Act of 2025 (OBBBA, Public Law 119-21) repealed Section 25C effective December 31, 2025. A qualifying furnace placed in service on or before that date still qualifies under the prior rules and is claimed on the 2025 return; a furnace installed on or after January 1, 2026 receives no federal credit. The repeal did not touch utility or state rebates, which remain the primary incentive layer for high-efficiency furnace upgrades in 2026 and beyond.
For a 2026 homeowner, the practical effect is up to $600 less federal tax benefit on a qualifying high-efficiency furnace replacement — and nothing at all changes for a furnace repair, which was never credit-eligible. Gas-utility programs (Atmos Energy's Mid-Tex furnace rebate in Texas and similar offers elsewhere) typically pay a few hundred dollars on a high-efficiency furnace install and are now the main way to offset the upgrade cost. Consult a tax professional before claiming any credit on an install close to the Dec 31, 2025 boundary — placed-in-service date, not purchase date, controls eligibility.