The short version: the Energy Efficient Home Improvement Credit (Section 25C) terminated for equipment placed in service after December 31, 2025. If you install a furnace, air conditioner, or heat pump in 2026, there is no federal tax credit for it. Utility rebates are still real money, and in Minnesota they are worth more than most homeowners assume.
What Happened to 25C
25C let homeowners claim 30% of qualifying equipment cost, capped at $600/year for a gas furnace or central AC and $2,000/year for an air-source heat pump or heat pump water heater. Under the One Big Beautiful Bill Act, the credit was terminated for property placed in service after December 31, 2025.
The cutoff is the placed in service date — when the equipment was installed and operational — not the date you ordered or paid. If your system went in on or before December 31, 2025, you can still claim it on that year's return using IRS Form 5695. If it goes in during 2026, you cannot.
Be careful with older guides on this topic. A great deal of HVAC content still describes 25C in the present tense, and some of it carries a 2026 date. Verify any credit claim against current IRS guidance before you count on it.
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What Is Still Available in 2026
Utility rebates. They are administered by your gas and electric providers, not the IRS, and they were not affected by the federal change. In Minnesota they are tied to AFUE tier:
| Utility | Equipment | Rebate |
|---|---|---|
| Xcel Energy | Gas furnace, 95% AFUE | $200 |
| Xcel Energy | Gas furnace, 96% AFUE | $300 |
| Xcel Energy | Gas furnace, 97% AFUE | $400 |
| Xcel Energy | Central AC, 13.4 SEER2+ (AHRI ref# required) | $450 |
| Xcel Energy | Smart thermostat (ENERGY STAR) | $50 |
| CenterPoint Energy | Gas furnace, 94–95.9% AFUE | $300 |
| CenterPoint Energy | Gas furnace, 96% AFUE or higher | $400 |
| Minnesota Energy Resources | Gas furnace (97% AFUE) | $300 ($500) |
An 80% AFUE furnace earns $0. Every Minnesota gas rebate requires 95% AFUE or higher. That is the single biggest thing to know before you pick a unit.
Three Traps Worth Knowing
Propane homes get nothing from CenterPoint. CenterPoint rebates require natural gas service. On an LP home the rebate is often the only financial reason to go condensing, so without it a like-for-like 80% unit is frequently the better call — especially in a mobile home, where 96% means abandoning the roof jack for sidewall venting plus a condensate drain that can freeze.
Electric co-ops set a higher SEER2 floor than Xcel. A standard 13.4 SEER2 air conditioner clears Xcel's floor and earns $450, but earns $0 from Connexus (13.8 floor) or Dakota Electric (15.2 floor). Confirm who actually provides your electricity before assuming an AC rebate.
Cooling-only AC is never a CenterPoint rebate. CenterPoint is a gas utility. AC rebates belong to your electric provider.
How to Claim
- Confirm your gas and electric utilities — they are often different companies, and each rebate rides on the utility that serves that fuel.
- Check the AFUE or SEER2 rating clears that utility's floor before you buy.
- Keep the invoice, model number, serial number, and installation date.
- File after installation through the utility's rebate application. Most have a deadline — CenterPoint requires paperwork by December 31 of the install year.
Where the Savings Actually Come From
Rebates are worth having, but they are the smaller lever. A $300 rebate matters less than the $1,500–$3,000 difference between contractor-supplied equipment pricing and buying the same unit factory-direct. Furnace Direct sells the equipment at factory-direct cost with live per-ZIP pricing, and you either use our install network or hire your own licensed installer.
Related reading: HVAC rebates in Minnesota and how to claim them, and 80% vs 96% AFUE explained.
This is general information, not tax advice. Rebate amounts and program terms change — verify current amounts with your utility before purchasing. Consult a tax professional about your own situation.
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