The Inflation Reduction Act created the largest federal incentive for heat pumps in U.S. history. Combined with state and utility programs, you can recover 30–70% of your installation cost. Here is exactly what is available in 2026 — and how to claim every dollar.
Federal Tax Credit: 25C (Energy Efficient Home Improvement Credit)
The 25C credit covers 30% of your heat pump cost, up to $2,000 per year. Key facts:
- Covers equipment + labor — the total project cost
- Directly reduces your tax bill — this is a credit, not a deduction. If you owe $3,000 in federal taxes and claim the full $2,000 credit, you pay $1,000
- Annual cap resets each tax year. Install a heat pump in 2026 (claim $2,000), install another in 2027 (claim another $2,000)
- Available through December 31, 2032
- No income limits — available to all taxpayers
- Heat pump must meet CEE highest tier efficiency specifications
- File IRS Form 5695 with your tax return
State Rebates: Where the Big Money Is
| State | Program | Rebate Amount | Who Qualifies |
|---|---|---|---|
| California | TECH Clean California | $1,000–$3,000 | Replacing gas furnace or AC |
| New York | NYSERDA Heat Pump Program | $2,000–$4,500 | All residents, income-tiered |
| Massachusetts | Mass Save | $2,500–$10,000 | Whole-home heat pump conversion |
| Maine | Efficiency Maine | $1,200–$2,800 | Per outdoor unit installed |
| Minnesota | Xcel Energy / CenterPoint | $500–$4,000 | Cold-climate heat pumps |
| Colorado | Xcel Energy Colorado | $600–$2,000 | Income-qualified up to $3,500 |
| Vermont | Efficiency Vermont | $400–$1,500 | Per ton of heating capacity |
| Oregon | Energy Trust of Oregon | $500–$1,800 | Ducted and ductless systems |
| Washington | PSE / Avista | $300–$1,200 | Converting from electric resistance |
| Illinois | ComEd / Ameren | $300–$1,500 | Cold-climate air-source heat pumps |
HEEHRA: Up to $8,000 for Low-Income Households
The Home Energy Efficiency and Heat pump Rebate Act (HEEHRA) provides point-of-sale rebates — not tax credits, but instant discounts at purchase — for low- and moderate-income households:
- Low-income (below 80% area median income): Up to $8,000 for a heat pump, covering 100% of project cost
- Moderate-income (80–150% AMI): Up to $4,000, covering 50% of project cost
- Rebate is applied at point of sale by the contractor — you do not wait for tax season
- Programs are rolling out state by state; 23 states had active HEEHRA programs as of May 2026
How to Stack: Maximize Your Savings
These programs can be combined. Here is the optimal sequence:
- HEEHRA point-of-sale rebate (if income-qualified) — applied immediately by contractor
- State/utility rebate — filed after installation, typically processed in 4–8 weeks
- Federal 25C tax credit — claimed on your next tax return using Form 5695
Example: Massachusetts homeowner, moderate income, installing a $9,000 cold-climate heat pump:
- Mass Save rebate: -$4,000
- HEEHRA (moderate income): -$4,000 (50% of remaining $5,000)
- Federal 25C credit: -$300 (30% of remaining $1,000)
- Net cost: $700 — a 92% reduction from the sticker price