The new tax law went into effect earlier this year, and one of the most important changes for homeowners is the expiration of various energy-related federal tax benefits at the end of 2025. Luckily, there are still a few months left for you to take advantage of these tax credits before they end on December 31st. Plus, if you act now, you may be able to stack your federal HVAC tax credits with the current rebates offered by Minnesota utility companies.
Joel Smith Heating and Air Conditioning can help you take advantage of both heat pump and furnace tax credits before year-end and explore local utility company rebates to pair them with for maximum savings — so you can be comfortable and energy-efficient without breaking the bank.
What’s Changing?
The “One Big Beautiful Bill” Act was signed into U.S. law on July 4, 2025. One of the many changes outlined by the bill is that the current federal HVAC tax credits will expire on December 31, 2025.
Until then, homeowners in the Twin Cities can still take advantage of the following benefits when they purchase qualifying equipment:
- Air-Source Heat Pumps: 30% tax credit, up to $2,000
- Gas Furnaces: 30% tax credit, up to $600
How to Claim Federal HVAC Tax Credits Before They Expire
The law specifies that, in order to claim these tax credits, qualifying HVAC equipment must be placed in service — as in, installed and fully operational — before December 31, 2025. That means that even if you purchase your equipment and have it delivered before that deadline, the units will not qualify for tax credits unless they are also fully functioning before 2026 begins.
When you file your 2025 taxes, you will most likely need to provide documentation confirming your equipment meets the minimum requirements, along with a dated invoice showing that your equipment was installed before the December 31st deadline.
What Qualifies for Heat Pump Tax Credits?
The current tax law offers a tax credit of 30% of any qualifying air-source heat pump’s equipment costs, up to $2,000. Most heat pumps that qualify for the tax credit meet the following criteria:
- Seasonal Energy Efficiency Ratio 2 (SEER2) of 16 or higher
- Energy Efficiency Ratio 2 (EER2) of 9.8 or higher
- Heating Seasonal Performance Factor 2 (HSPF2) of 8.5 or higher
- Coefficient of Performance (COP) at 5°F of 1.75 or higher
- Capacity Ratio of 60% or higher at 5°F/47°F
Units with an EER2 of 11 or higher and a Capacity Ratio of 45% or higher at 5°F/47°F also qualify, as long as all other criteria are met.
Luckily, when you work with Joel Smith HVAC, you won’t have to worry about finding a unit that checks all of these boxes. Our team can help you select a high-quality heat pump that meets both your needs and federal requirements.
Current Heat Pump Rebates
In Minnesota, there are several utility companies currently offering rebates when you install a qualifying heat pump in your home before the end of the year. These utility company rebates include:
- Xcel Energy Heat Pump Rebate
- CenterPoint Energy Heat Pump Rebate
- Connexus Energy Heat Pump Rebate
Your rebate will depend on your energy provider and the equipment you select. When you work with Joel Smith HVAC, our team can help you determine the most effective equipment for maximum savings, and we’ll even submit the rebate forms for you. Learn more about Minnesota heat pump rebates.
What Qualifies for Furnace Tax Credits?
The current tax law offers a tax credit of 30% of any qualifying gas furnace’s equipment cost, up to $600. Qualifying equipment includes ultra-efficient gas furnaces with annual fuel utilization efficiency (AFUE) ratings of 97% or higher. The team at Joel Smith HVAC can help you select the right equipment for your home in order to take advantage of this tax credit.
Current Furnace Rebates
In addition to the new furnace tax credit, Minnesotans can also benefit from the furnace rebates offered by various local utility companies. Current rebates available through the end of the year include:
- Xcel Energy Furnace Rebates
- CenterPoint Energy Furnace Rebates
Again, your rebate will depend on both your utility provider and the equipment you select. The Joel Smith HVAC team would be happy to help you select the best equipment for your needs in order to meet utility companies’ requirements. Plus, we’ll complete and submit all the rebate paperwork on your behalf. Learn more about Minnesota furnace rebates.
Why Now Is the Best Time to Upgrade
These federal tax incentives can only be claimed for qualifying equipment placed in service before December 31, 2025. Additionally, utility company rebates can change or go away at any time. By upgrading now, you can take advantage of these limited-time incentives while they’re available. Plus, new heat pumps and furnaces can also make your home more energy efficient, potentially giving you additional savings in your utility bills as well.
Maximize Your HVAC Savings with Joel Smith Heating and Air Conditioning
At Joel Smith Heating and Air Conditioning, we understand the importance of balancing comfort and cost savings. That’s why our team works hard to find Minnesotans like you the best tax credits, rebates, and other savings on all your HVAC equipment. For personalized recommendations on the best equipment for your home to qualify for maximum savings, get in touch with us today at (763) 792-1066 or send us a message online.