Yes, absolutely! There are significant tax credits and rebates available for installing a new, energy-efficient furnace, particularly at the federal and state/utility levels. This is excellent news for homeowners in Bay City and surrounding areas. Here’s a breakdown of what to look for:

Federal Tax Credits (Inflation Reduction Act – IRA)

The Energy Efficient Home Improvement Credit (formerly known as the Nonbusiness Energy Property Credit) was significantly enhanced by the Inflation Reduction Act of 2022 and extends through 2032.

Credit Amount: You can claim 30% of the cost of qualifying energy-efficient home upgrades, up to an annual maximum of $1,200 for certain residential energy property.
For Furnaces: Specifically for natural gas, propane, or oil furnaces, you can claim up to $600 for the cost of the unit and its installation.
Efficiency Requirements: To qualify for the 2025 federal tax credit, gas furnace systems must have an AFUE rating of at least 97% AFUE and must be ENERGY STAR certified.
How to Claim: You’ll claim this credit when you file your federal income taxes using IRS Form 5695, “Residential Energy Credits.” Keep all documentation from your purchase and installation, including the invoice from your HVAC contractor and the AHRI (Air-Conditioning, Heating, and Refrigeration Institute) certificate of performance for your specific unit.
Annual Cap: Remember the $1,200 annual cap for most home energy improvements. If you do other qualifying upgrades (like windows, doors, insulation) in the same year, the total credit for these items (excluding heat pumps) cannot exceed $1,200. There’s a separate $2,000 credit specifically for heat pumps and biomass stoves/boilers, with an overall annual credit limit of $3,200.

Michigan State and Utility Rebates

Michigan residents can often stack federal tax credits with local utility rebates, leading to even greater savings. The two main utility providers in Bay City are Consumers Energy and DTE Energy.

Consumers Energy Rebates (Residential) – Current for 2025

Consumers Energy offers rebates for qualifying high-efficiency furnaces installed by participating contractors:

Natural Gas Furnace 97% AFUE or Higher, AHRI Rated: Up to $500 rebate.
Natural Gas Furnace 95% – 96.99% AFUE, AHRI Rated: Up to $100 rebate.
Eligibility:
- You must be a Consumers Energy residential natural gas customer.
- The equipment must be installed by a participating Consumers Energy Trade Ally contractor who is active in their Home Performance with ENERGY STAR (HPwES) program.
- Applications must be submitted by the contractor.
- Rebates are for replacement furnaces (not new construction).
- Funds are limited and available on a first-come, first-served basis. Applications for 2025 must be received by December 31, 2025.

DTE Energy Rebates (Residential Natural Gas Customers) (Current for 2025)

DTE Energy also provides rebates for high-efficiency natural gas furnaces:

Furnace 97% AFUE or higher: $400 rebate.
Furnace 96% AFUE: $200 rebate.
Furnace 95% AFUE: $100 rebate.
Eligibility:
- You must be a DTE residential natural gas customer.
- Rebates are for single-family homes (2 or fewer connected units, each individually metered). Not valid for new construction (home must be older than 24 months).
- A participating contractor will help with proper sizing, installation, and submitting the rebate form online.
- Rebate funds are available on a first-come, first-served basis.

Michigan Home Energy Rebates (MiHER) Program

This is a newer state-level program funded by the U.S. Department of Energy.
It aims to provide rebates for energy efficiency and electrification upgrades.
The program is set to open to residents statewide in early 2025. The amount of the rebate will vary based on factors like household income, identified energy efficiency upgrades, and estimated energy savings. This could potentially offer additional incentives on top of federal and utility programs. You’ll need to watch for updates from the Michigan Department of Environment, Great Lakes, and Energy (EGLE) or your utility provider.

Michigan Propane Rebates

If you use propane (instead of natural gas) in Bay City, there are also specific rebates available for ENERGY STAR certified propane furnaces. These are typically submitted within 60 days of installation.

Key Steps to Maximize Your Savings:

Consult with a Qualified HVAC Contractor: They are your best resource. A good contractor will be knowledgeable about current federal tax credits, utility rebates (Consumers Energy, DTE Energy), and any state programs. They can help you select a qualifying furnace and guide you through the application process for rebates.
Verify Eligibility: Always confirm the specific AFUE ratings and other requirements for both federal tax credits and any utility/state rebates before making a purchase. Requirements can change.
Keep All Documentation: Save invoices, receipts, furnace model numbers, serial numbers, AFUE ratings, and any AHRI certificates. You’ll need these for tax purposes and rebate applications.
Check for Updates: Rebate programs and tax credit rules can be updated. Check the official websites of the IRS, Consumers Energy, DTE Energy, and the Michigan EGLE for the most current information.

By taking advantage of these incentives, installing a new, high-efficiency furnace can be a much more affordable upgrade, providing long-term savings on your energy bills while improving your home’s comfort and air quality.