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 rebates
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Utility electric rates

Many utilities offer special electric rates that lower the cost to operate a heat pump. Visit our cost of heat comparison resource for help estimating your annual energy costs of operating a heat pump with different system configurations, utilities, and rate types.  

A special rate that many utilities offer is a “dual fuel” rate. Enrolling in this type of program allows your utility to control your heat pump during times of peak demand, in exchange for a highly reduced electric rate. To enroll, you must have a heat pump serving as the primary source of heat, and a natural gas, propane, or electric thermal storage system as the secondary source of heat. 

Most electric cooperatives offer dual fuel rates. Minnesota Power and Otter Tail also offer dual fuel rates, although installing a second meter is required, which can be costly. Check with your electric utility to learn if they offer dual fuel electric rates.  

Xcel Energy offers an electric space heating rate for both all-electric systems and dual fuel systems with a switchover temperature at or below 35 degrees. This is a discount applied to all electric usage from October – May. There is no cost to the customer to enroll in the rate, and no metering equipment needs to be installed. To enroll in this rate: 

  • Call Xcel Energy Customer Service at 1-800-895-4999 
  • Let them know that you would like to switch to the Electric Space Heating Rate and have an air source heat pump. They can make the change in their billing system.

Federal tax credits

Up to $2,000

Heat pumps installed between 1/1/2023 and 12/31/2032 may qualify for the 25C Energy Efficient Home Improvement 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).  

Visit the Energy Efficient Home Improvement Credit page from the IRS for additional information. 

To qualify, equipment needs to meet the Consortium for Energy Efficiency (CEE)’s highest efficiency tier (not including any advanced tier).

 Additional Resources: 

  • 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 $2,400

Utility heat pump rebates range from $50 to $2,400, depending on system type and size. Visit our utility rebates database to see what your utility offers. 


See rebates by utility providers

Unsure of your utility service provider? Use the interactive map provided by the Minnesota Public Utilities Commission to identify your local utility services.

Federal rebates

up to $8,000 (coming soon)

The State of Minnesota will implement the two home energy rebate programs established by the federal Inflation Reduction Act (IRA). Once developed and implemented, these programs will provide up to $8,000 in rebates for heat pump installations.   

Most of the IRA and state rebates will be income qualified and will only apply to households earning less than 150% of their area median income (AMI). Refer to the AMI look-up table from the Minnesota State Energy Office to see if you would qualify.  

These programs are still under development by the Minnesota State Energy Office. They estimate the rebates will be available in spring 2025.    

Additional Resources 

  • MN Department of Commerce: Home Energy 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.

State rebates

up to $4,000 (coming soon)

Additional Minnesota state rebates will be available for heat pumps. To qualify, customers must: 

  • Apply for and/or receive the related federal rebate, 
  • Have an energy audit within the last 18 months, 
  • Perform necessary insulation upgrades, and 
  • Purchase and install heat pump of contractor-recommended capacity. 

This program is still under development. We expect that the state heat pump rebates will be available after the launch of the federal Home Energy Rebate program, estimated for spring 2025. 

Additional Resources: 

  • MN Department of Commerce: Heat Pump Rebate Program details. This page will be updated as more information becomes available. 

Local Rebate Match Programs

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 Coon Rapids’ Green Homes Program matches an awarded utility rebate for an air source heat pump.  

  • 50% utility rebate match available, up to $250 
  • Visit the City of Coon Rapids’ Green Homes Program page for full details.  

The City of Edina’s Community Climate Action Fund matches an awarded utility rebate for a cold climate heat pump.  

  • 50% utility rebate match available to all Edina residents  

  • 100% utility rebate match available to residents who qualify for the environmental justice bonus  

Requirements and notes:  

  • Within 36 months before installation, applicant must have completed a Home Energy Squad “Planner” visit.  Home Energy Squad is typically scheduled a few weeks out. If a visit is needed, applicants are encouraged to schedule one as soon as possible.  

  • Applicant must have been awarded a utility rebate for a qualifying cold climate air source heat pump.  

  • Applicant must apply for the cost share match for approval, prior to project completion. View the application under Step 3 of the Community Climate Action Fund page.  

  • Visit the City of Edina’s Community Climate Action Fund page for full details. 

The City of Hopkins’ Climate Solutions Fund provides rebates for ENERGY STAR certified cold climate air source heat pump. 

  • Up to $1,500 rebate available to all residents
  • Up to $2,500 rebate available to income-qualified residents

Requirements and notes:

 The City of St. Louis Park’s Climate Champions for Homes cost-share program matches an awarded utility rebate for a cold climate heat pump.  

  • 50% utility rebate match available to all residents 

  • 100% utility rebate match available to residents who qualify for the environmental justice rate  

Requirements and notes:  

  • At least 36 months before installation, applicant must have completed a Home Energy Squad “Planner” visit.   

  • Applicant must have been awarded a utility rebate for a qualifying cold climate air source heat pump.  

  • Applicant must complete the Climate Champions online application for approval, prior to project completion.   

  • Visit the City of St. Louis Park’s Climate Champions page for how to apply to the cost share application and full details.  

The City of Minneapolis provides a bonus rebate for air source heat pumps.  

  • Up to $1,000 rebate available to all residents 
  • Up to $4,000 rebate available to residents living in a Green Zone  

Requirements and notes: 

  • The equipment must qualify for Xcel’s Cold-Climate rebate tier. 
  • The total rebate amount, between the utilities and the City of Minneapolis, cannot exceed the total cost of installing the heat pump. 
  • Visit Center for Energy and Environment’s bonus rebate page for more information about this and other home energy rebates.  

The City of Northfield matches 50% of awarded Xcel Energy heat pump rebates, up to $2,500. Households must earn 80% or less of the Dakota County annual median income to qualify. Visit the City of Northfield’s Energy Efficiency Rebate page for full details. 

Financing

Center for Energy and Environment (CEE) offers financing for energy upgrades, including heat pumps, through several loan programs:  

  • MHFA Fix Up Fund  

  • Secured or Unsecured Home Energy Loans  

  • Many city-specific programs with lower interest rates, some including 0% APR financing

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. CEE loan officers are available to assist you through the entire process and can be reached at 612-335-5884. 

Limited time promotions

Current Promotions:

Available until 12/31 

  • Manufacturer Rebate: $1,500 off
  • Centerpoint Energy: $1,050 Cash back
  • Xcel: $2,000 Cash back
  • Green Cost Share Program: $2,000 Cash back,  $6,500 for residents located in Green Zone
  • Tax Credits: $2,600 (tax liability reduction)

Total incentives: $9,150 ($13,650 for residents located in Green Zone)