Installing a new high-efficiency furnace or air conditioner in Minnesota can qualify for rebates and tax credits that meaningfully reduce your net cost. These programs change regularly, so this guide covers the current landscape as of 2026 — though always verify current amounts directly with the programs before purchasing.
Federal Tax Credits (IRA — Inflation Reduction Act)
The Inflation Reduction Act (IRA) extended and expanded federal tax credits for home energy improvements. For HVAC equipment, the relevant credit is the Energy Efficient Home Improvement Credit (25C):
Natural gas furnaces: 30% of equipment and installation cost, up to $600/year. Central AC: 30% of equipment and installation cost, up to $600/year. Heat pumps (air source): 30% of cost, up to $2,000/year. Heat pump water heaters: 30% of cost, up to $2,000/year.
The credit applies to the qualified equipment cost. To qualify, furnaces must meet specific efficiency thresholds — the IRS and ENERGY STAR maintain lists of qualifying products. Most Goodman 96%+ AFUE furnaces qualify. You claim the credit on IRS Form 5695 when filing your federal taxes. It's a direct credit (reduces tax owed, not just taxable income) up to the annual cap.
Important note: the IRA credits have annual caps per category. If you replace both a furnace and AC in the same tax year, you may be limited to $600 for furnaces and $600 for AC — $1,200 total for those two categories combined. Heat pumps have a separate $2,000 cap.
Xcel Energy Rebates (Minnesota's Largest Utility)
Xcel Energy offers rebates for residential HVAC efficiency upgrades in their Minnesota service territory:
Gas furnace rebates: Xcel has historically offered $50–$150 for qualifying high-efficiency furnace replacements. Specific current amounts should be verified at xcelenergy.com/rebates. Smart thermostat rebates: $50–$75 for qualifying connected thermostats (Nest, Ecobee, etc.). These rebates are typically applied at time of equipment registration or via a rebate form submitted after installation.
Minnesota Energy Programs (MHFA and CIP)
The Conservation Improvement Program (CIP) requires Minnesota gas and electric utilities to run energy efficiency programs. This creates rebate opportunities beyond just Xcel — your specific utility may offer programs:
CenterPoint Energy: Has offered gas furnace rebates of $50–$200 for qualifying high-efficiency systems in their Minnesota service area. Minnesota Energy Resources (MER): Also participates in CIP programs with furnace rebates. Rural electric cooperatives: Many Minnesota co-ops offer rebates for heat pump installations and efficiency upgrades.
Check your specific utility's website or call their energy efficiency line to verify current programs before purchasing equipment.
Low-Income Programs
Minnesota has additional programs for income-qualified homeowners: Weatherization Assistance Program (WAP) — free energy efficiency improvements including furnace replacement for qualifying low-income households, administered through county community action agencies. Energy Assistance Program (EAP) — helps low-income households pay heating bills; can reduce the urgency of an emergency furnace replacement situation.
How to Stack Rebates and Credits
You can often combine programs: Federal 25C tax credit (30% of cost up to $600), PLUS your utility's rebate ($50–$200), PLUS manufacturer promotions (Goodman periodically runs contractor incentives that get passed to buyers).
A typical scenario: $1,200 Goodman 96% AFUE furnace from Furnace Direct + $800 installation labor = $2,000 total. Federal 25C credit: 30% of $2,000 = $600 (at the cap). Xcel Energy rebate: $100. Net cost after credits: $1,300. That's 35% off the gross cost through available programs.
Maximizing Your Rebate Capture
Keep all receipts and documentation. Confirm equipment model numbers meet efficiency requirements before purchasing. File the federal tax credit (Form 5695) with your return in the year of installation. Submit utility rebate forms promptly — many expire within 90 days of installation. Ask your installing contractor if they handle rebate paperwork (many do).
Shop Factory-Direct to Maximize Your Total Savings
Rebates and credits apply to your total cost, but the biggest lever is starting with lower equipment cost. Furnace Direct's factory-direct wholesale pricing on Goodman equipment saves $500–$1,500 vs. contractor-supplied pricing before any rebates are applied. Combined with available incentives, total savings can reach 40–50% off typical contractor installation quotes.
Browse at furnace.direct/collections/heating or furnace.direct/collections/cooling.
Related reading: Annual Heating Cost Guide | How to Buy HVAC Equipment Online | Goodman Furnace Comparison
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