These rules are moving. Status below is as of November 2026, based on the Federal Register, DOE, and trade reporting. Check the Federal Register and your distributors before you stock up or sell on a deadline.
Quick answer (November 2026)
| Rule | Requirement | Compliance date | Status |
|---|---|---|---|
| Residential gas furnaces | 95% AFUE (condensing) for non-weatherized and mobile home gas furnaces | Manufactured on or after Dec. 18, 2028 | Still in force, but the Supreme Court vacated the D.C. Circuit’s ruling upholding it in June 2026, and DOE is weighing a delay to Jan. 1, 2030 |
| Residential water heaters | Heat pump–level efficiency for most electric tanks over 35 gallons; small changes for gas tanks | Manufactured on or after May 6, 2029 | Final rule; no rollback announced |
| Gas tankless water heaters | Would have required condensing tankless | Would have been Dec. 2029 | Gone. Disapproved by Congress and withdrawn May 20, 2025 |
| Commercial water heaters | Higher efficiency for commercial gas units | Oct. 6, 2026 | DOE won’t enforce until Oct. 6, 2027 |
And the federal 25C tax credit for heat pumps, heat pump water heaters, and high-efficiency furnaces ended for equipment placed in service after December 31, 2025.
On this page
Two federal efficiency rules are headed at plumbing and HVAC shops: a furnace standard in December 2028 that effectively ends new non-condensing gas furnaces, and a water heater standard in May 2029 that pushes most electric tanks to heat pump technology. One of them is in a legal fight that just got reopened. A third rule, for gas tankless, is already dead.
Here’s exactly what each rule requires, where it stands, and what it means for your installs, inventory, and sales conversations.
The 2028 furnace rule
- What: DOE’s 2023 final rule sets a minimum 95% AFUE for non-weatherized residential gas furnaces and mobile home gas furnaces.
- When: furnaces manufactured on or after December 18, 2028.
- What it means: 95% AFUE effectively requires condensing technology. New 80% furnaces stop being made for these classes.
- What it doesn’t cover: furnaces already installed, repairs, and the furnace classes outside those two, such as many weatherized, oil, electric, and commercial units.
- Sell-through: the rule applies to manufacture date, not install date. Units built before the cutoff can generally still be sold and installed; confirm with your distributor how long their inventory will last.
Where the furnace fight stands
| When | What happened |
|---|---|
| 2023 | DOE finalizes the 95% AFUE standard |
| November 2025 | The D.C. Circuit upholds the rule in American Gas Association v. DOE |
| January 2026 | Challengers petition the Supreme Court |
| April 27, 2026 | DOE publishes a petition from the American Gas Association, the American Public Gas Association, and the National Propane Gas Association asking to move the furnace compliance date to January 1, 2030 at minimum; comments closed May 27, 2026 |
| June 2026 | The Supreme Court vacates the D.C. Circuit’s ruling and sends the case back for reconsideration in light of the current administration’s position on the rule |
| As of November 2026 | The rule remains in force while the case is reconsidered; DOE has not announced a final decision on the delay |
Sources: Contracting Business (June 9, 2026); Federal Register, 91 FR (April 27, 2026), docket EERE-2026-BT-STD-0001; Service Magazine; Mechanical Mentor.
What that means for you: plan around December 18, 2028, because that’s still the law. But the odds of a delay or a rewrite went up in 2026. Don’t tell customers “80% furnaces are banned in 2028” as if it’s settled.
What a 95% install really involves
The equipment price difference is only part of it. Swapping an 80% furnace for a condensing unit often changes the install:
- Venting: condensing furnaces typically vent through PVC to a sidewall or the roof, not into a metal flue and chimney.
- Combustion air: many are two-pipe installs with a separate intake.
- Condensate: a drain or condensate pump is needed, with a plan for freezing in unconditioned spaces.
- The orphaned water heater: when the furnace leaves a shared chimney, the gas water heater left on it may no longer vent properly. That can mean a liner or other changes. Evaluate it on every conversion.
- Location: closet and attic installs with no easy path for new vent pipes are where costs jump.
Quote the whole scope, not just the box. The venting and drain work is what surprises customers.
The 2029 water heater rule
- What: DOE’s April 2024 final rule for consumer water heaters, published May 6, 2024.
- When: water heaters manufactured on or after May 6, 2029.
- The big change: the most common electric storage water heaters must reach the efficiency of an entry-level heat pump water heater. DOE projected that more than half of new electric storage water heaters would use heat pump technology, up from about 3%.
- Gas storage: a moderate increase, not a condensing requirement.
- Status: final, with no rollback announced as of November 2026.
Water heater details by type
A.O. Smith’s summary of what changes in 2029:
| Type | What changes |
|---|---|
| Electric tank, over 35 to 120 gallons | Requires heat pump technology |
| Electric tank, 20 to 35 gallons | Capped at a 50-gallon first-hour rating and 135°F maximum temperature |
| Nominal “40-gallon” electric units rated 36–37 gallons | Must be reduced to 35 gallons to stay in the smaller category |
| Grid-enabled electric over 75 gallons | No change |
| Gas tank, 20 to 55 gallons | Small efficiency increase; atmospheric models need a damper |
| Gas tank, over 55 to 100 gallons | Unchanged |
| Gas tankless | Not part of this rule |
Source: A.O. Smith, “DOE NAECA4 Residential Regulations for Water Heaters”; DOE announcement, April 30, 2024.
Heat pump water heater installs
If you replace electric tanks, you’ll be installing a lot more heat pump water heaters. They’re a different install:
- Air volume: they pull heat from the surrounding air and need enough space around them. Small closets may need louvered doors or ducting. Check the manufacturer’s minimum room size.
- Temperature: efficiency drops in cold spaces like unheated garages and basements in cold climates.
- Condensate: they produce water that needs a drain or pump.
- Size and weight: they’re typically taller and heavier, so measure clearances first.
- Electrical: check the circuit; some models are designed for the existing 240V circuit, others plug into 120V.
- Noise: the compressor and fan run; don’t put one next to a bedroom without talking it through.
An assessment visit before the replacement prevents a lot of callbacks. Some shops are already selling it as a service.
Gas tankless: the rule that died
DOE finalized a separate rule in December 2024 that would have required condensing technology for gas tankless water heaters starting in late 2029. Congress disapproved it under the Congressional Review Act (H.J. Res. 20, signed May 9, 2025), and DOE withdrew it effective May 20, 2025. Under the CRA, DOE can’t reissue the same or a substantially similar rule unless Congress later authorizes it. For now, non-condensing gas tankless units stay on the market.
Commercial water heaters
Standards for commercial gas water heaters were set to apply to products manufactured after October 6, 2026. On April 24, 2026, DOE issued an enforcement policy statement saying it won’t enforce them for one year, until October 6, 2027. The same gas industry petition also asks DOE to push that date to January 1, 2030.
The tax credit is gone
The federal Energy Efficient Home Improvement Credit (25C), which helped customers pay for heat pumps, heat pump water heaters, and high-efficiency furnaces, isn’t available for equipment placed in service after December 31, 2025. If your sales materials still mention a federal credit for these, update them. State and utility rebates may still exist; check before quoting a number.
How shops should plan
That last one is where dispatch comes in. During a transition, only some of your techs are ready for the new equipment. In VortechPro, specialist tags keep condensing furnace conversions and heat pump water heater installs on trained techs, and photos of the venting, the space, and the electrical panel go on the job before anyone quotes. $99/mo for 5 techs, +$20 each. More in best dispatch software for HVAC and for plumbers.
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