The federal government is currently offering some of the best HVAC incentives in history under the Inflation Reduction Act (IRA). If you're buying a new furnace, heat pump, or central AC in 2026, you may qualify for a tax credit worth $600 to $2,000—money directly off your federal tax bill, not just a deduction.
Here's everything Minnesota homeowners need to know.
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The Energy Efficient Home Improvement Credit (Section 25C)
The Section 25C credit covers high-efficiency heating and cooling equipment installed in your primary residence. The credit is nonrefundable (it reduces taxes you owe, but won't generate a refund on its own) and has annual caps by equipment type.
| Equipment Type | Max Annual Credit | Efficiency Requirement | Credit % of Cost |
|---|---|---|---|
| Gas/Propane/Oil Furnace | $600 | ≥96% AFUE | 30% |
| Central Air Conditioner | $600 | ≥16 SEER2 / 12 EER2 | 30% |
| Air-Source Heat Pump | $2,000 | ≥8.5 HSPF2 (cold climate) | 30% |
| Heat Pump Water Heater | $2,000 | Energy Star certified | 30% |
| Biomass Stove/Boiler | $2,000 | ≥75% efficiency | 30% |
| Home Energy Audit | $150 | Certified auditor | 30% |
| Annual Cap (all 25C items) | $1,200/year | — | — |
| Heat pump exception | $2,000/year | Heat pumps have their own $2K cap | — |
Does My Goodman Furnace Qualify?
To qualify for the $600 furnace tax credit, your furnace must be at least 96% AFUE (the highest efficiency tier). All Goodman furnaces with model numbers containing "96" or "97" in the efficiency designation meet this threshold. Specifically:
- GMVC96 / GMSS96 — 96% AFUE, qualifies
- GMVC97 / GMSS97 — 97% AFUE, qualifies
- GMVC80 / GMSS80 — 80% AFUE, does NOT qualify
- GMEC96 — 96% AFUE, qualifies
You'll need the manufacturer's Certificate of Qualification (also called a "25C certificate") — Goodman provides this for qualifying models on their website. Keep it with your tax records.
How to Claim the Credit
The process is straightforward:
- Buy and install a qualifying furnace, AC, or heat pump in your primary home (rental properties don't qualify)
- Get the manufacturer's certificate confirming the equipment meets 25C requirements
- Keep your receipt/invoice showing the purchase price and installation date
- File IRS Form 5695 with your federal tax return — this is where you calculate and claim the credit
- The credit reduces your tax liability dollar-for-dollar (not just a deduction)
Minnesota State & Utility Rebates
On top of the federal credit, Minnesota homeowners can often stack additional rebates from their utility provider:
| Utility / Program | Rebate Amount | Equipment Type |
|---|---|---|
| Xcel Energy (gas) | $50–$200 | 96%+ AFUE furnace |
| CenterPoint Energy | $100–$300 | High-efficiency furnace |
| Xcel Energy (electric) | $200–$600 | Heat pump (ENERGY STAR) |
| Great Plains Energy | $50–$150 | High-efficiency AC |
| MN Power / Lake Country Power | Varies | Heat pump, smart thermostat |
| PACE financing | Low-interest loan | Energy efficiency upgrades |
Check your specific utility provider's rebate portal — rebate amounts change seasonally and are often first-come, first-served. Stacking a $200 utility rebate on top of a $600 federal credit effectively reduces your out-of-pocket furnace cost by $800.
Real-World Example: What You Actually Save
Let's say you buy a Goodman 96% AFUE two-stage furnace for $1,400 from Furnace Direct (factory-direct pricing) and pay $800 for licensed installation. Total project cost: $2,200.
- 30% federal tax credit on the equipment cost: $420 (30% of $1,400)
- Xcel Energy rebate (estimate): $150
- Annual fuel savings vs. 80% AFUE unit: ~$280/year
- Effective first-year savings: $850
- 10-year total savings vs. 80% unit: ~$3,650
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