Texas heat pump incentives: 2024 guide

Texas is already one of America’s biggest markets for heat pumps, with about 2 million households in the Lone Star State relying on the electric, super-efficient technology as of 2020. 

With generous incentive programs now in place, and new all-climate models that essentially eliminate the need for backup strip heaters, heat pumps are becoming even more appealing. Most Texans should qualify for at least a couple thousand dollars in rebates, discounts, or tax credits.

Like all American taxpayers, Texas homeowners are eligible for all of the heat pump incentives available through the Inflation Reduction Act of 2022 (IRA). We've covered those benefits in detail here, but in summary:

• Any household can claim a $2,000 federal tax credit (or 30% of the price, whichever is less) against the cost to install an air-source heat pump that meets modest efficiency requirements. Since it’s a tax credit, rather than a direct rebate, you’re only eligible for as much free money as you’re on the hook to pay the IRS per year. You can claim the rebate with tax form 5695, the same one you'd use for solar panels.

• Income-dependent rebates of up to $8,000 are coming…eventually. The Texas State Energy Conservation Office (SECO) hasn’t yet announced when they’ll be available. As of late February 2024, Texas has yet to file an application for the funding, according to the US Department of Energy. If you’re counting on those rebates, you’ll need to wait until the program is in place, because the rebates will not apply retroactively to any system that was installed before the program's start date. If you absolutely need a heat pump in the meantime, just go ahead and get one, because it’ll be difficult to claim this rebate anyway. If every application received the full $8,000 rebate, there’s only enough funding for about 86,000 out of the 9.9 million households in Texas.

Texas doesn’t offer any statewide rebates or discounts for heat pumps, and we haven’t found any significant incentive programs from local governments, either.

The most likely source of free money for a heat pump is your utility company. Several of Texas’ power companies offer small to modest rebates on new heat pumps.

Oncor (the main electrical utility in Dallas, Ft. Worth, Waco, and about 400 other towns and cities in north, central, and west Texas) does offer substantial heat pump discounts. If you hire a participating service provider, a discount of between $1,800 and $3,300 will be applied at the point of sale, depending on the system capacity and your household income). Equipment only needs to meet federal minimum efficiency standards to qualify for the discounts. Over the last few years, the discounts have been available for installations made between February and November in a given calendar year.

Southwestern Electrical Power Company, which operates in a sliver of east Texas and one area in the panhandle, offers up to $3,500 for a qualifying heat pump installed by an approved contractor. (Details on those qualifications aren’t readily available, but an earlier version of the program awarded the biggest rebates to heat pumps with a SEER2 efficiency rating of 17.2 or higher.) 

According to DSIRE (a database of clean energy and energy efficiency policies and incentives), a large handful of other utility companies around Texas offer modest rebates or direct discounts for heat pumps, including Garland Power and Light, Guadalupe Valley Cooperative, Austin Energy, United Cooperative Services / Touchstone Energy Cooperative, and CenterPoint Energy (in the Houston area). 

Other utilities offer incentives based on the amount of energy that a heat pump would help you avoid using during peak power demand, including Texas-New Mexico Power, Southwestern Public Service Company, and AEP Texas North and AEP Texas Central.

When you sign up for the EnergySage Marketplace, you’ll get an instant estimate of how much it might cost to install a heat pump in your home, based on real-world quotes for similar homes from vetted installers. You can schedule consultations with seasoned pros. If you want some independent guidance, one of our Energy Advisors can help you through the process. We’re already the country’s largest marketplace for solar energy, and now we’ve brought that clean-energy experience to heat pump shopping. Learn more here.

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