Energy efficient furnace

[Lenny8]

Is there a tax credit for installing an energy efficient furnace?

[LenaH · Accepted solution]

Yes. If you made energy-efficient improvements to your home in 2021, such as like furnaces, boilers, biomass stoves, heat pumps, water heaters, central air conditioners, and circulating fans, the tax credit is 26 percent of the costs for assembly, preparation, and installation as well as piping and wiring.

Please follow the steps below to enter your furnace cost:

1. Open your return.
2. Search energy improvements with the magnifying glass tool.
3. Select the Jump to link. 
4. Enter your furnace in the appropriate classification.
5. Click continue.
6. Answer the on-screen questions.
7. Your home energy credit summary should appear on the following screen. 

[Lenny8]

What does the question - were any of these improvements related to the (construction) of your main home mean? What do they mean by construction? Like a new build?

[KrisD15]

Exactly,

the credit would not be claimed by a Builder. 

(They might be able to claim a credit using Form 8908)

It would need to be a Homeowner improving their existing home. 

[ZmanNC]

I installed a 16 seer 96% efficient gas furnace in my house.  My understanding is that I should be eligible for tax credit of 26% of the cost.  The expense was $13,500 but Turbo Tax is only giving me a $50 tax credit.

The steps provided in your post are correct up to step 3, then they fall apart.

After selecting the link for "Jump to energy improvements", your step says to "Enter your furnace in the appropriate classification" but the screen does not allow you to enter anything.  It only has a radio button asking if you made energy-effient improvements "Yes/No".  If you answer "Yes", "Continue", then answer a few more  questions, it takes you to the "Tell us How Much You Paid for Energy-Saving Improvements" screen.  On that screen, I entered $13,500 into the "Advanced Main Air Circulating Fan" entry field.  When I got to the end, it says that I only got a $50 credit.  It should have been $3510.

I went through it again, and now it says that I get $0.  I also tried putting the $13,500 into the "Furnaces and hot water boilers" field, but that continued to give me $0.

Please tell me how I can get the $3510 credit.

[JulieS]

There are actually two separate sections that cover furnaces and they have different rates and limitations.

The first is the general category of Natural gas, propane, oil furnace or oil hot water boiler. That section is limited to a 10% tax credit and no more than $150 per furnace.

You may need to check with the source that told you it was a 26% tax credit. There is a 26% credit for a Biomass furnace, but that is not the same as a natural gas furnace. 

This is also not a refundable credit, so it is limited to the amount of tax on your current return. Any excess carries forward to next year.

See the image below for where the 26% credit applies and the details of what is meant by Biomass furnace. 

[ZmanNC]

After talking to a Turbo Tax CPA, I found the issue.  Credits for energy efficient furnaces are entered on the "Tell us "How Much You Paid for Energy-Saving Improvements" screen.  TurboTax has the furnace fan ("Main Air Circulating Fan") as a separate entry field with a max credit of $50 on 2021 taxes - it's the 2nd to last line on the screen.  The furnace itself ("Furnace and hot water boiler") is a separate entry field with a max credit of $150 on 2021 taxes - it's the last line on the screen.  So regardless of how much you spent on both the fan and furnace, the maximum credit is $200 for the 2021 tax return.

[Drobc]

Where do I enter a natural gas 96% energy efficient furnace specifically on the turbo tax questionnaire?

[Vanessa A]

The furnace goes under water boilers.  If you click on the learn more link, you will see it includes all Natural Gas, Propane and Oil furnaces.  

To enter these credits into TurboTax take the following steps:

• Federal
• Deductions and Credits
• I'll Choose what I work on
• Home Energy Credits which is under the "Your Home" category
• Worth up to 30% of costs with a maximum credit $2,000 for

The Home Improvement Energy Efficient Credit is a non-refundable credit

• You can combine the $2,000 credit with the $1,200 credit for a total of $3,200
• This credit is a use it or lose it credit.  If you do have enough tax liability in the year you buy and install the item, you will not be able to carry the credit forward.

[DoninGA]

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@Drobc wrote:

Where do I enter a natural gas 96% energy efficient furnace specifically on the turbo tax questionnaire?

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On the page Enter Your Qualified Energy Costs use the box labeled Water boilers for the cost of the furnace.  The box needs to be re-labeled.  If you click on the Learn More link it will describe -

Enter the amounts you paid for a natural gas, propane, or oil furnace or hot water boilers...

That is the correct location to enter the furnace cost as it will flow to the Form 5695 Line 24a for Enter the cost of natural gas, propane, or oil furnace or hot water boilers