10 Things to Know Before Replacing a Furnace

Replacing a furnace is not just a matter of choosing a brand and AFUE rating. The equipment has to be correctly sized for the house, compatible with the rest of the HVAC system, safely vented, and installed well enough to deliver the efficiency you paid for.

There is also an important 2026 change: homeowners should be cautious with older articles that still advertise a federal furnace tax credit. The federal Energy Efficient Home Improvement Credit under Section 25C is no longer allowed for property placed in service after December 31, 2025, according to the IRS.

If you are also considering replacing more than the furnace, see our Things to Know Before HVAC Replacement guide.

1. Do Not Replace Your Old Furnace With the Same Size Without a Load Calculation

An old furnace’s capacity is not proof that your replacement should have the same BTU rating.

The house may have received new windows, insulation, air sealing, an addition, or other changes since the old system was installed. The original furnace may also have been oversized from day one.

ENERGY STAR recommends that contractors determine the home’s heating and cooling load using ACCA Manual J and select equipment using current design and installation standards. The calculation considers factors such as the home’s size, insulation and windows rather than relying on square footage alone.

Ask each bidder:

• What is my calculated heating load?
• What design outdoor temperature did you use?
• What furnace output capacity are you proposing?
• Why is that capacity appropriate for this house?

If a contractor will not explain how the equipment was sized, get another quote.

2. AFUE Tells You Efficiency --- Not Whether the Furnace Is the Best System for Your House

AFUE, or Annual Fuel Utilization Efficiency, describes how much of the fuel’s heat is converted to space heating under the federal test method.

A higher AFUE can reduce fuel waste, but the highest number on the proposal is not automatically the best purchase. Climate, fuel prices, installation cost, how long you expect to own the home, duct condition, and installation quality all affect the decision.

As of August 2026, current ENERGY STAR criteria are:

Furnace type ENERGY STAR criterion

---

Gas furnace --- U.S. North 97% AFUE or greater Gas furnace --- U.S. South 95% AFUE or greater Oil furnace 87% AFUE or greater

ENERGY STAR’s South includes states such as California, Texas, Florida, Georgia and Virginia; its North includes states such as New York, Illinois, Colorado, Michigan and Washington.

The FTC’s Energy Labeling Rule covers furnaces, so compare the furnace’s EnergyGuide information and exact model number rather than accepting a broad “high efficiency” description.

3. A High-Efficiency Furnace Can Require Venting and Drainage Changes

Moving from an older non-condensing furnace to a condensing furnace can change more than the furnace cabinet.

DOE building-science guidance explains that direct-vent sealed-combustion equipment brings combustion air from outdoors and vents exhaust outdoors through sealed piping. Condensing furnaces also produce condensate that must be drained correctly.

That can mean:

• New intake and exhaust venting
• Exterior penetrations
• Condensate piping or a condensate pump
• Changes around an existing chimney
• Work involving another appliance that shared the old vent
• Code-related upgrades

Get the venting and drainage plan in writing.

4. Your Ductwork Can Undermine an Expensive New Furnace

A premium furnace connected to leaky, undersized or poorly balanced ducts is still attached to a distribution problem.

ENERGY STAR recommends that contractors inspect duct systems for air leaks and insulation and measure airflow.

Before approving the replacement, ask about:

• Supply and return leakage
• Restricted return airflow
• Damaged or disconnected ducts
• Poor insulation in unconditioned areas
• Rooms with persistent comfort problems
• Filter or return sizing that could restrict airflow

Do not assume “ductwork included” means the contractor will correct the entire duct system. Make the quote identify exactly what will change.

5. Compare Single-Stage, Two-Stage and Variable Operation for Comfort, Not Just Price

Two furnaces with similar AFUE ratings can behave differently.

A basic single-stage furnace generally has one firing level. Two-stage equipment can operate at lower and higher stages. More advanced modulating equipment can adjust output more gradually. Variable-speed blower technology can also affect airflow, comfort, noise and air-conditioning performance.

Ask the contractor to list the exact:

• Furnace model number
• Number of heating stages or modulation range
• Blower type
• Compatible thermostat/control requirements
• Included thermostat, if any

Compare those specifications across quotes.

6. Before Buying Another Furnace, Price a Heat Pump or Dual-Fuel System

Replacing a failed furnace with another furnace may be simplest, but it should not be automatic.

Modern air-source heat pumps provide heating and cooling. ENERGY STAR says cold-climate heat pumps are designed for low outdoor temperatures, and its current cold-climate certification includes third-party verified performance at 5°F.

If you have a relatively new furnace but an aging central air conditioner --- or you are replacing both --- ENERGY STAR recommends considering a heat pump paired with the furnace as a dual-fuel system.

Compare:

• Furnace-only replacement
• Heat-pump replacement
• Heat pump plus furnace/dual fuel
• Heating and cooling operating costs
• Electrical work required
• Local utility rates
• Climate and low-temperature needs
• Current local incentives

7. If You Are Replacing AC Equipment Too, Verify the Components Are a Certified Match

AHRI explains that a Certified Reference Number can verify that an outdoor condenser and indoor evaporator combination has been certified as a matched system. An AHRI certificate may also be useful for some utility or municipal rebate programs.

If the proposal includes a new air conditioner or heat pump, ask for:

• Outdoor-unit model number
• Indoor-coil model number
• Furnace or air-handler model number
• AHRI Certified Reference Number when applicable
• Certified efficiency ratings for the proposed combination

Do not compare broad efficiency claims without checking the actual equipment combination.

8. The Cheapest Quote May Be Missing Work the Expensive Quote Includes

ENERGY STAR recommends written, itemized estimates and advises consumers to compare cost, efficiency and warranties. It also recommends a written proposal specifying project costs, model numbers, schedule and warranty information.

Ask every bidder to identify:

• Exact furnace model
• Removal and disposal
• Labor
• Permit and inspection fees
• Venting and condensate work
• Gas-line modifications
• Electrical work
• Sheet-metal transitions
• Filter cabinet
• Thermostat
• Duct modifications
• Startup and commissioning
• Safety testing where applicable
• Manufacturer warranty
• Contractor labor warranty
• Specific exclusions

9. The Old Federal Furnace Tax-Credit Advice Is Outdated for 2026 Installations

This is one of the biggest reasons to check the date on furnace advice.

The IRS says the Energy Efficient Home Improvement Credit under Section 25C is not allowed for property placed in service after December 31, 2025.

So if your furnace is installed and placed in service in 2026, do not build your budget around old pages describing the previous federal 25C furnace credit.

The same timing problem affects old heat-pump tax-credit advice: ENERGY STAR’s federal air-source heat-pump credit page says that credit applied to qualifying products purchased and installed through December 31, 2025.

That does not mean all incentives disappeared. ENERGY STAR maintains a ZIP-code rebate finder that currently lists utility and partner offers for furnaces, heat pumps, central air conditioners, smart thermostats and other products. State, local and utility programs have their own rules, funding and deadlines.

Check incentives before installation because programs may require qualifying equipment, participating contractors, preapproval or documentation.

10. Warranty Length Is Not Enough --- Ask What You Must Do to Keep It

A proposal that says “10-year warranty” does not tell you everything.

Separate the manufacturer’s parts warranty from the contractor’s labor warranty. Ask whether registration is required, what deadline applies, whether coverage changes for a subsequent homeowner, and what maintenance documentation is required under the specific manufacturer’s terms.

Warranty rules vary by manufacturer and model, so get the applicable written warranty.

Keep:

• Signed contract and final invoice
• Furnace model and serial numbers
• Warranty documents
• Registration confirmation, if applicable
• Permit/inspection documentation
• AHRI certificate if applicable
• Manuals
• Commissioning/startup records
• Rebate paperwork
• Contractor contact information

Also ask the installer to show you the filter size, replacement location, thermostat operation, shutoff locations and maintenance schedule.

Before You Replace a Furnace Checklist

• Get two or three detailed written proposals when practical.
• Ask for the Manual J heating-load result.
• Compare output capacity, not just the old furnace size.
• Record exact manufacturer and model numbers.
• Compare AFUE and EnergyGuide information.
• Confirm staging, blower and thermostat compatibility.
• Have ducts and airflow evaluated.
• Get venting and condensate work in writing.
• Confirm permits and inspections.
• Confirm electrical, gas-line and sheet-metal work.
• If the AC is old, price a heat pump or whole-system replacement.
• Request the AHRI reference/certificate when applicable.
• Check utility, state and local rebates before installation.
• Do not budget for the expired federal 25C furnace credit on a 2026 installation.
• Compare parts and labor warranties separately.
• Get exclusions and potential additional charges in writing.
• Keep invoices, serial numbers, registration and inspection records.

FAQ

How do I know if I should repair or replace my furnace?

There is no single age or repair-cost rule that fits every furnace. Consider the diagnosis, repair cost, safety, reliability history, efficiency, parts availability and whether other HVAC components are also nearing replacement.

Is a 97% AFUE furnace always better than a 95% furnace?

Not automatically. Higher AFUE means higher tested fuel-use efficiency, but installed cost, climate, venting requirements, fuel prices and installation quality affect whether the upgrade is worthwhile.

Should a contractor perform Manual J for a furnace replacement?

ENERGY STAR recommends verifying proper system size using Manual J. Simply copying the old furnace’s capacity can repeat an existing sizing mistake.

Is there a federal furnace tax credit in 2026?

The previous Section 25C Energy Efficient Home Improvement Credit does not apply to property placed in service after December 31, 2025, according to the IRS. Check separately for current state, local and utility incentives.

Should I replace my furnace with a heat pump?

It is worth pricing, especially if your air conditioner also needs replacement. Climate, electricity and fuel prices, electrical capacity, ductwork and low-temperature heating needs matter. A dual-fuel heat pump plus furnace is another option.

What should be included in a furnace replacement quote?

Look for exact model numbers, labor, removal, permits, venting/condensate work, necessary electrical or gas work, sheet metal or duct changes, thermostat/control details, startup testing, warranties and exclusions.

The Bottom Line

The biggest furnace-replacement mistake is treating the job as a box swap.

The equipment has to be correctly sized, properly vented, compatible with the ducts and controls, and installed and commissioned correctly. Compare exact models and complete scopes of work --- not just brand names, AFUE percentages and bottom-line prices.

For a 2026 project, ignore outdated assumptions about the old federal furnace tax credit and check current local incentives instead. If your cooling equipment is aging too, price a heat pump or dual-fuel alternative before committing to a furnace-only system.

A better quote is the one that clearly explains what your house needs, exactly what will be installed, what the total scope includes, and who is responsible if something goes wrong.

Sources

• IRS --- Energy credit termination dates under Public Law 119-21
• ENERGY STAR --- Furnaces Key Product Criteria
• ENERGY STAR --- Clean Heating and Cooling
• ENERGY STAR --- Air-Source Heat Pumps
• ENERGY STAR --- 10 Tips for Hiring a Heating and Cooling Contractor
• ENERGY STAR --- Rebate Finder
• FTC --- Energy Labeling Rule
• AHRI --- Air Conditioners and Heat Pumps
• AHRI --- Directory of Certified Product Performance
• U.S. Department of Energy Building Science Education --- HVAC Direct Vent Equipment