Heat pump incentives: Save big on clean HVAC

Heat pumps are a win-win: Great for homeowners, great for the environment, and sometimes even good for the electrical grid. These high-efficiency, super-comfortable, all-electric home heating and cooling systems use much less energy than traditional HVAC equipment and can run entirely on renewable energy.

Given the plethora of benefits, it makes sense that governments and utilities are eager to install heat pumps in more homes—and they’re offering financial incentives to achieve that. Federal heat pump subsidies expire after December 31, 2025, but many utility companies, states, and local governments also provide their own heat pump rebates and tax credits.

How much can you save with these incentives? It depends on where you live, what sort of heat pump you install, and your household income. Here's a guide to all the free money you might be able to claim when you add a heat pump to your home.

The total price of a heat pump system varies by type and the complexity of the installation, but on average, it costs about $5,643 per ton—that’s before any heat pump rebates and incentives. 

Federal, state, and local incentives can significantly reduce what you pay out of pocket. Here’s a look at average costs before and after state and local incentives:

If you install a qualifying air-source heat pump in your primary residence by December 31, 2025, you can claim a federal tax credit worth 30% of the project cost, up to $2,000. But after that date, the credit expires—systems installed in 2026 or later won’t be eligible.

Because it’s a tax credit, you can only claim as much as you owe to the IRS. For example, if you owe $1,500 in federal taxes, you can only use $1,500 of the credit, even if your system qualifies for the full $2,000. Unused credit cannot be carried forward to future years.

The tax credit also applies only to primary residences, not rental or vacation homes. (Sorry, landlords—though other incentive programs may help reduce your costs.)

You can stack additional credits for other efficiency upgrades covered under the same program. Since heat pumps perform best in a well-insulated home, you can claim:

• Up to $1,200 (30%) for insulation and air-sealing improvements

• Up to $600 (30%) for an electrical panel upgrade (if needed for your heat pump)

• $150 (30%) for a home energy audit

Just keep in mind that the total amount you can claim on efficiency upgrades can’t exceed $1,200—and these tax credits also expire after December 31, 2025. 

Which heat pumps are eligible for the tax credit?

To qualify for the federal tax credit, your heat pump must meet specific efficiency requirements

Eligible heat pumps must meet the requirements set by the Consortium for Energy Efficiency (CEE), a nonprofit organization that develops efficiency standards and programs across various product categories. The required specs vary by the type of heat pump and the region, but in every case, the efficiency requirements are more stringent than the minimums set by the Department of Energy.

Required specs, South region

Required specs, North region

You can find the SEER2 and HSPF2 ratings on any manufacturer’s website. To find specs like COP @ 5F (cold-weather heating efficiency) or Capacity Ratio @ 5F (general cold-weather performance), we'd recommend looking at the cold-climate heat pump database hosted by Northeast Energy Efficiency Partnerships (NEEP).

The Inflation Reduction Act (IRA) also funded direct, point-of-sale rebates for new heat pump installations—worth up to $8,000 for low-income households and $4,000 for moderate-income households.

Funded through the Home Electrification and Appliances Rebate (HEAR) Program, this initiative launched with a $4.5 billion budget to be distributed to states through September 30, 2031, or until funds are depleted, whichever comes first. However, clean energy funding was frozen in 2025 under the Trump administration, limiting access to these rebates in most states.

To qualify, your heat pump must meet Energy Star standards. That’s a bit easier than the stricter CEE requirements tied to the federal tax credit, and identifying eligible models is straightforward—manufacturers and retailers usually highlight Energy Star certification in their listings, or you can confirm it in the Energy Star database.

However, these rebates may be trickier to access than the tax credit, for a few reasons:

• Not yet available everywhere: According to the NASEO Residential Energy Efficiency Task Force, the rebates are active in only six states as of October 9, 2025: Georgia, Indiana, Michigan, North Carolina, Wisconsin, and Washington, D.C.

• Income-based eligibility: Households with an income below 80% of the area median income are considered low-income and may be eligible for the full $8,000. Households with incomes between 80% and 150% of the median are considered moderate-income and could receive $4,000. Above 150%, you’re ineligible.

• Limited funding: The program’s $4.5 billion budget will only cover a few hundred thousand homes nationwide. For context, if every rebate went to low-income households at the full $8,000 level, that would help just 562,500 homes—a tiny fraction of the roughly U.S. households.

• You can’t claim it yourself: Unlike the 25C tax credit, this rebate is applied at the point of sale through approved contractors, who must coordinate with their state energy office. The approval process is lengthy and varies by state, meaning the timeline is largely out of the homeowner’s control.

Beyond federal programs, there are hundreds of state, local, and utility incentives that can make installing a heat pump much more affordable. These programs can range from a few hundred dollars to thousands of dollars—it all depends on where you live.

According to the Database of State Incentives for Renewables and Efficiency (DSIRE), 49 states and Washington, D.C. currently offer state- or utility-level heat pump incentives. (As of November 10, 2025, Alaska is the only state with no heat pump-related listings in DSIRE.) 

Just keep in mind that DSIRE isn’t exhaustive—it can exclude county, city, and town programs. For example, a quick Google search reveals that Juneau, Alaska does have a pretty substantial heat pump subsidy available for low- and moderate-income residents. A quick Google search for “[your town] heat pump incentives” is often the fastest way to uncover these local programs.

As more states and utility companies expand their clean energy programs, now is a smart time to explore your heat pump options. Local incentives, energy savings, and improved comfort can make upgrading more affordable than you might expect.

Even if you’re not ready to install yet, getting quotes and learning which state or utility programs apply in your area can help you plan ahead—and position your home for lower energy bills for years to come.