Incentives & Financing

Substantial financing and incentives are available for heat pump installations. Many of these incentives can be “stacked” to maximize upfront cost savings. 

Utility Electric Rates

Many utilities offer reduced price dual fuel electric rates that lower the cost to operate a heat pump. To qualify for these rates, a home must have a dual fuel system. These systems include a heat pump serving as the primary heating system with natural gas, propane, or electric thermal storage serving as the backup system. Check with your electric utility to determine whether they offer dual fuel electric rates. 

Our cost of heat comparison resource compares the annual energy costs of different applications such as a dual fuel or all-electric heat pump against a conventional furnace and air conditioner. The tool compares standard, all electric, and dual fuel electric rates with options to select propane or natural gas as the pre-existing or dual fuel heat source. 

Federal Tax Credits

Up to $2,000

Heat pumps installed between 1/1/2023 and 12/31/2032 may qualify for the Energy Efficient Home Improvement Credit (also known as the 25C tax credit). The amount of credit that can be claimed for a heat pump is equal to 30% of total project costs, up to $2,000. A dual fuel system where a heat pump and furnace are both installed could qualify for $2,600 (qualifying furnaces are eligible for an additional $600 tax credit). Additional information and FAQ from the IRS can be found here.

To qualify, equipment needs to meet the Consortium for Energy Efficiency (CEE)’s highest efficiency tier (not including any advanced tier). Models that have not yet tested to Appendix M1 (i.e., have a SEER2 rating) but have equivalent or higher tested Appendix M values (i.e., have a SEER rating) still qualify as meeting CEE Tiers. 

CEE Directory: Lists of products that qualify for the 25C tax credit 

NEEP ccASHP Product List: This list of cold climate heat pumps can be filtered by tax credit eligibility 

Specification Summary: The highest CEE efficiency tiers are listed in this summary of the main heat pump specifications for ducted and ductless systems. 

Utility Rebates

up to $2,000

Utility rebates range from $50 to $2,200, depending on system type and size. Connect with your utility to learn what they offer. 

See Rebates by Utility Providers

Federal Rebates

Up to $8,800 (coming soon)

The federal Inflation Reduction Act (IRA) established two home energy rebate programs focused on energy efficiency and electrification projects. The State of Minnesota intends to apply for and implement these programs. 

Up to $8,000 in rebates through these programs will be available for heat pump installations. The Minnesota State Energy Office will manage the funding distribution. Rebate eligibility and value will be based on annual income. The federal guidance is for households earning less than 150% of their area median income to qualify for rebates. However, the Minnesota State Energy Office will ultimately decide what the eligibility metrics are. 

These programs are still under development by the Minnesota State Energy Office. The exact date rebates will be available, and what the qualifications will be, are currently unknown. 

MN Department of Commerce: Heat pump rebate program details. This page will be updated as more information becomes available. 

Home Energy Rebates FAQs: Questions and answers on the home energy rebate programs from the Department of Energy. 

Home Energy Rebate Programs Guidance: Guidance from the Department of Energy for states on how to apply for IRA programs. 

Local Cost-share Programs

Up to $2,750

Several local governments are offering additional funding for heat pump installation to complement utility rebates and funding from the Inflation Reduction Act. 

The City of Edina’s Climate Action Fund provides city funding for as much as $2,750 per heat pump project. At this time all cold climate heat pumps will qualify for the city’s cost share program. Residents must have completed a Home Energy Squad visit in the last 36 months. Visit wait times are generally a few weeks, so homeowners are encouraged to schedule as soon as they know they'd like to take advantage of the cost-share funding. Property owners or their contractors can learn more and register their project to secure cost-share funding here. 

The City of St. Louis Park’s Climate Champions program provides funding for heat pump projects, up to $2,500. At this time all cold climate heat pumps will qualify for the city’s cost share program. Residents must have completed a Home Energy Squad visit in the last 36 months. Visit wait times are generally a few weeks, so homeowners are encouraged to schedule as soon as they know they'd like to take advantage of the cost-share funding. Learn more and apply for cost-share funding.

The City of Northfield will match 50% of dollar amount of Xcel Energy heat pump rebates, up to $2,500 for households who earn up to 80% of the Dakota County annual median income ($89,400 for a family of four). Homeowners can learn more and apply here. 

Financing

CEE offers ASHP financing through several loan programs: 

Approval is subject to program guidelines, please review all loan terms before applying. 

To apply or for more information on the best financing program for your project, visit mncee.org/home-improvement. If you have questions, you can reach out to one of CEE’s loan officers at 612-335-5884. CEE’s loan officers will be available to assist throughout the entire process. 

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