Incentives and Costs
Expand each section to see amounts for different households.
You can combine Electrification Rebates with the tax credits for additional savings!
Upfront Discount
Save up $8,000
Depending on income
For low-income households (under 80 percent of Area Median Income), the Electrification Rebates cover 100 percent of your heat pump costs up to $8,000. For moderate-income households (between 80 percent and 150 percent of Area Median Income), the Electrification Rebates cover 50 percent of your heat pump costs up to $8,000. The rebates may be implemented differently in each state, so we cannot guarantee final amounts, eligibility, or timeline. And without additional appropriations from Congress, the rebate programs will end once their initial IRA funding is exhausted.
Total Electrification Rebates discounts across all qualified electrification projects are capped at $14,000.
Tax Credit
30%
Capped at $2,000 per year
25C provides households a 30 percent tax credit for heat pumps and heat pump water heaters, capped at $2,000 per year. The credit resets each tax year, effectively becoming available again for additional projects.
25C also includes a 30 percent tax credit up to $600 for an electrical panel upgrade, but only if it’s upgraded in conjunction with another upgrade covered by 25C (like a heat pump). So it might be advantageous to do both at once!
Estimated Cost
$8,000 - $35,000
Before incentives, depending on house factors
All the details
Expand each section to learn more.
How does it work?
A heat pump is a single electric appliance that can replace both your traditional air conditioner and home heating system (like a furnace or boiler).
At the simplest level, heat pumps use electricity to move heat from one place to another. In cooling mode, a heat pump acts like an air conditioner, moving the heat from inside your home to the outside. In heating mode, heat pumps go into reverse and pump heat from the air outside your home to the inside. That might seem a bit counterintuitive. After all, how can something move heat from the outside air when it’s 20°F? But heat is just energy, and there’s energy in the air all the way down to absolute zero, which is -465°F. Heat pumps designed for cold climates can keep your home warm — without a backup heating source — even when outside temperatures are below -20°F.
Heat pumps come in two main forms: ducted and ductless. Ducted heat pumps use your home’s existing ductwork (or new ducts if needed) to disperse heated or cooled air throughout your home. Ductless (or “mini-split”) heat pumps are easier to install where there is no existing ductwork. Ductless heat pump heads are usually mounted high on the wall, and each one serves one room or area of your home. There are also window-unit heat pumps, which are an especially good option for renters.
How will it save me money?
Heat pumps are 3-5 times more efficient than most current fossil fuel heating systems. This is because it takes less energy to move heat around than to produce it. In a natural gas furnace, the heat must first be produced by burning gas and then additional energy must be used to distribute it around your house. With a heat pump, the heat energy itself is taken for free from the air outside, so energy is only needed to transport that heat indoors and then distribute it around your house.
As a result, heat pumps are often far less expensive to run than other heating systems, which translates to hundreds of dollars per year in savings for an average household. And these dollar savings are increased when fossil fuel prices rise — as they have in recent months.
Why is it better for the environment?
Heat pumps don’t burn fossil fuels — they’re electric! When paired with clean electricity sources like rooftop or community solar, heat pumps warm your home without warming the planet. Even if your electricity supply isn’t 100 percent clean today, heat pumps are still more climate friendly than other heating systems because they use so much less total energy. And as the grid gets cleaner, their emissions will continue to fall. Even under conservative modeling assumptions, 98 percent of U.S. households would cut their carbon emissions by installing heat pumps today.
Because they are not connected to the gas grid, heat pumps also do not contribute damaging methane leaks into the atmosphere. Your gas furnace (and the gas lines connected to your house) are the source of ongoing emissions of unburned methane gas, which has many times the global warming effect of carbon dioxide.
Heat pumps do use small amounts of refrigerants that can sometimes leak into the atmosphere and contribute to climate change. However, the United States is moving with other countries to adopt strong standards that require the use of new, climate-friendly refrigerants.
Other benefits?
Heat pumps can dehumidify the air on hot summer days and filter the air all year long. They’re also more comfortable and customizable than traditional HVAC systems: modern heat pumps are internet-connected (controllable from your smartphone) and variable-speed (keeping your home at a steady temperature, and some allow the temperature to be customized room-by-room.
