What is AFUE?
AFUE stands for Annual Fuel Utilization Efficiency. It measures how efficiently a gas furnace converts fuel (natural gas) into heat over a typical year.
The Simple Explanation
AFUE is expressed as a percentage. Think of it as "how many cents of every dollar you spend on gas actually becomes heat in your home."
80% AFUE Furnace
80¢ becomes heat, 20¢ goes up the chimney
95% AFUE Furnace
95¢ becomes heat, only 5¢ is wasted
The higher the AFUE rating, the more efficient the furnace—and the less you spend on heating for the same amount of warmth.
Comparing Gas Furnace Efficiency Levels
Here's how different AFUE ratings compare. Annual heating costs assume $1,500/year with an 80% AFUE furnace as the baseline.
Non-condensing furnace. 80 cents of every $1 in gas becomes heat; 20 cents goes up the flue.
Pros
- Lower upfront cost
- Simpler installation
- Metal flue pipe (less expensive)
Cons
- • Higher operating costs
- • No tax credits
- • Minimum legal efficiency
Best For
Mild climates, tight budgets, or homes being sold soon
Est. Annual Heating Cost
$1,500
Condensing furnace. Extracts more heat from exhaust gases. 90 cents of every $1 becomes heat.
Pros
- Good balance of cost and efficiency
- Lower operating costs than 80%
- Reliable technology
Cons
- • May not qualify for all rebates
- • Requires condensate drain
- • PVC flue needed
Best For
Most homeowners seeking good value
Est. Annual Heating Cost
$1,333
Premium condensing furnace. 95 cents of every $1 becomes heat. Only 5% waste.
Pros
- Qualifies for tax credits
- Significant fuel savings
- Lower carbon footprint
Cons
- • Higher upfront cost
- • Condensate drain required
- • PVC flue required
Best For
Cold climates like NJ, long-term homeowners
Est. Annual Heating Cost
$1,263
Maximum efficiency available. 98 cents of every $1 becomes heat.
Pros
- Lowest possible operating costs
- Maximum tax credits
- Premium comfort features
Cons
- • Highest upfront cost
- • Minimal savings vs 95%
- • More complex system
Best For
Those wanting the absolute best, regardless of payback
Est. Annual Heating Cost
$1,224
How Much Can You Save?
Savings Calculation Example
Let's say you currently spend $1,500/year on heating with an 80% AFUE furnace and upgrade to 95% AFUE:
Current cost: $1,500/year at 80% efficiency
Heat you're getting: $1,500 × 0.80 = $1,200 worth of heat
New cost for same heat: $1,200 ÷ 0.95 = $1,263/year
Annual savings: $1,500 - $1,263 = $237/year
15-Year Savings
$3,555
+ Tax Credit
$600
Total Benefit
$4,155+
2025 Tax Credits for High-Efficiency Furnaces
Federal Energy Efficient Home Improvement Credit
Homeowners can claim 30% of the cost of a qualifying gas furnace, up to $600 per year, through the Energy Efficient Home Improvement Credit (Section 25C).
To Qualify:
- Furnace must be ENERGY STAR certified
- Typically requires 95% AFUE or higher
- Must be installed in your primary residence
- Credit available through 2032
Pro Tip: This credit resets annually, so if you're also upgrading your AC, you may want to do the projects in separate tax years to maximize credits.
Which Efficiency Level Should You Choose?
Choose 80% AFUE if:
- You're on a very tight budget
- You live in a mild climate with low heating needs
- You're selling the home soon (won't recoup the investment)
- Your home has existing metal flue that's expensive to convert
Choose 90% AFUE if:
- You want good efficiency without maximum cost
- Your climate is moderate
- You don't care about tax credits
Choose 95% AFUE if: (Our Recommendation for NJ)
- You live in a cold climate like New Jersey
- You plan to stay in your home 5+ years
- You want to maximize tax credits ($600)
- You want the best balance of efficiency and value
- You're concerned about environmental impact
Choose 98% AFUE if:
- You want absolute maximum efficiency regardless of cost
- Environmental impact is your primary concern
- You have very high heating bills and want to minimize them
Frequently Asked Questions
What is a good AFUE rating for a gas furnace?
For most homes in cold climates like New Jersey, a furnace with 90-95% AFUE is considered good and offers an excellent balance of efficiency and cost. High-efficiency furnaces (95%+) provide the best energy savings but cost more upfront. The minimum allowed by federal regulations is 80% AFUE for non-weatherized gas furnaces.
Is a 95% AFUE furnace worth it?
In cold climates with high heating costs (like New Jersey), a 95% AFUE furnace is usually worth the extra investment. You'll save approximately 15-20% on heating costs compared to an 80% furnace. With current gas prices and federal tax credits of up to $600 for high-efficiency furnaces, most homeowners see payback within 5-8 years.
What is the most efficient gas furnace available?
The most efficient gas furnaces on the market achieve 98-99% AFUE ratings. Lennox offers a 99% AFUE model. However, the real-world difference between 95% and 98% AFUE is minimal (about $30-50/year savings), so 95% AFUE is often the sweet spot for value.
Why can't gas furnaces be 100% efficient?
Gas furnaces can't reach 100% efficiency because some heat is always lost through the exhaust/flue gases, even with condensing technology. Additionally, small amounts of energy are used for the blower motor and controls. The theoretical maximum is around 99% for the combustion process itself.
How much can I save by upgrading from an 80% to 95% AFUE furnace?
If you currently spend $1,500/year on heating with an 80% AFUE furnace, upgrading to 95% AFUE would save approximately $237/year. Over a 15-20 year furnace lifespan, that's $3,500-$4,700 in savings. Plus, you may qualify for federal tax credits up to $600.
What AFUE rating qualifies for tax credits in 2025?
To qualify for the federal Energy Efficient Home Improvement Credit (Section 25C), gas furnaces must be ENERGY STAR certified, which typically means 95% AFUE or higher. You can claim 30% of costs up to $600 per year. This credit is available through 2032.
Does AFUE account for duct losses?
No, AFUE only measures the efficiency of the furnace itself—how much fuel is converted to heat. It doesn't account for heat lost through ductwork, which can be 25-40% in poorly insulated or leaky ducts. That's why duct sealing and insulation are also important for overall heating efficiency.
What's the difference between single-stage, two-stage, and modulating furnaces?
Single-stage furnaces run at 100% capacity whenever on. Two-stage furnaces can run at low (65-70%) or high capacity. Modulating furnaces adjust output incrementally (25-100%). Modulating furnaces are most efficient and comfortable but cost more. For maximum efficiency, pair a high-AFUE rating with modulating or two-stage operation.