Significant incentives are available for contractors and program administrators to leverage in their work or promote to their customers to make heat pump installations more appealing and affordable. Contractors and program administrators can access and promote various rebates, tax credits, and funding opportunities at the local, state, and federal levels to help customers lower upfront costs for equipment and installation. Below, we outline key incentive options and provide tools to help you identify incentives available in your service area.
Tax Credits
Federal Tax Credit for Air Source Heat Pumps
Present customers with installation savings through the Federal Energy Efficient Home Improvement Credit (25C). This credit returns up to 30% of installation costs (up to $2,000) directly to homeowners on their federal tax return. This significant reduction in upfront costs makes heat pump installations more accessible to your customers. This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.
Rebates
Home Energy Rebates
The Home Energy Rebates Program, part of the Inflation Reduction Act, is designed to make energy-efficient home upgrades more affordable for American households. With a historic $8.8 billion in funding allocated, this program offers cost reductions on heat pump equipment and installation. Homeowners can receive rebates at the point of sale or through fast-turnaround processes, giving them quick savings on high-efficiency upgrades that lower energy bills over time. It's important to note that states needed to apply for funding to participate in this program, and the rollout is still underway. To check the status of your state's funding and availability of rebates, you can visit https://www.energy.gov/save/rebates. This tool allows you to stay informed about when your state will begin offering these valuable incentives.
The Home Energy Rebates encompass two key initiatives:
- Home Efficiency Rebates (HOMES)
The Home Efficiency Rebates Program rewards households for total energy performance improvements, offering rebates that increase with the level of energy savings achieved. Per DOE guidance, retrofits must address at least one major upgrade related to heating and cooling, envelope, and/or water heating end uses. And heating, cooling, and water heating products must meet ENERGY STAR product criteria in effect on the date of installation.
- Home Electrification and Appliance Rebates (HEAR)
The Home Electrification and Appliance Rebate Program is focused on efficient electrification projects for low-to-moderate income (LMI) households with income less than 150% of the area median. It also requires that entities eligible to carry out projects on behalf of LMI households apply rebates as a discount at Point-of-Sale, as well as allows for installer incentives of up to $500, commensurate with the scale of installed upgrades.
State and Utility Incentives
Utility providers and local or state governments often offer rebates, tax credits, and other financial incentives to encourage homeowners to invest in energy-efficient solutions. Before making any home energy upgrades, it's essential to research the specific incentives available in your area. Here are some steps to help you discover the rebates and programs that can benefit you and your customers:
Contact Your State Energy Office | Check with Your Local Utility Company | Utilize Online Resources |
| Each state has a state energy office that provides information about available incentives, grants, and programs. They can guide you on specific requirements and eligibility criteria. | Many utility companies offer their own rebate programs for energy-efficient appliances, heating and cooling systems, insulation, and more. Reach out to your utility provider directly or visit their website to learn about current offers. | A key resource for finding energy efficiency incentives is the Database of State Incentives for Renewables & Efficiency (DSIRE). This comprehensive database provides detailed information on state and local incentives for renewable energy and energy efficiency. With its user-friendly interface, you can easily search for available rebates, tax credits, and other financial incentives specific to your location and the upgrades your customers are considering. |
Additional Sources of Funding
In addition to federal, state and local incentives, homeowners and program administrators can explore alternative funding sources for energy efficiency upgrades.
- National Energy Improvement Fund (NEIF)
The National Energy Improvement Fund (NEIF) offers financing tailored to energy efficiency upgrades, including heat pump installations. NEIF provides flexible, unsecured loan options that help homeowners afford energy-efficient heating and cooling systems. Through partnerships with certified contractors, NEIF ensures quality installations while enabling homeowners to reduce energy costs and carbon footprints.
- Clean Energy Credit Union
Clean Energy Credit Union provides Green Home Improvement Loans to support homeowners in making energy-efficient upgrades to their homes. Eligible improvements include installing air source heat pumps and other eco-friendly solutions, empowering homeowners to reduce energy costs and environmental impact.
- Residential Property Assessed Clean Energy (PACE) Financing
Residential PACE allows homeowners to finance energy efficiency, renewable energy and other eligible improvements on their homes using private sources of capital. PACE programs are typically enabled through state legislation, and authorized at the local government level. Municipalities may directly administer residential PACE programs, or through public-private partnerships with one or more PACE providers.
- Green Banks
Green banks provide financing—not grants—for energy efficiency projects, including heat pump projects. Financing requires repayment, allowing each dollar to be reinvested and maximize impact. This model supports proven, technically viable projects that have moved beyond the research phase and offer a potential return. Green banks focus on sustainable market growth, often combining financing with other market development initiatives to promote widespread adoption. To learn more and find green banks in your area, visit the Coalition for Green Capital's directory of green banks by state.
- Training for Residential Energy Contractors (TREC)
The Training for Residential Energy Contractors program provides grants to enhance training and development for contractors working in residential energy efficiency. This program focuses on improving the skills and knowledge of contractors to better implement energy-efficient solutions. Additionally, program administrators can explore funding from state energy offices and utility companies that provide financial support for energy efficiency initiatives.
Incentive Tools
When considering energy efficiency upgrades, homeowners can leverage various online tools to assess potential savings and find applicable incentives. These resources help you understand the financial benefits of switching to electric appliances, including heat pumps.
- Rewiring America Calculator
The Rewiring America Calculator is an invaluable resource for homeowners seeking to transition to electric appliances. This interactive tool enables users to input their location, utility, household income, and details about their household to discover available incentives for upgrading to electric options, such as heat pumps. By presenting personalized information on financial incentives, including rebates and tax credits, the calculator helps homeowners navigate the financial landscape of energy-efficient upgrades.
- ENERGY STAR Home Improvement Savings
The ENERGY STAR Home Improvement Savings page, maintained by the Environmental Protection Agency (EPA), offers homeowners information on how to save money through incentives for energy-efficient home upgrades. Users can take advantage of this tool to identify eligible energy-efficient products, create a personalized savings plan for maximum financial benefit, and locate financial incentives such as tax credits, rebates, and special offers. The tool also provides access to resources for income-based assistance programs to support energy upgrades and connects homeowners with local installation professionals and retailers.
- Special Offers and Rebates from ENERGY STAR Partners
Homeowners can take advantage of special offers and rebates provided by ENERGY STAR partners, which include utility companies, manufacturers, and retailers. This resource lists available rebates and financial incentives for purchasing ENERGY STAR certified products, such as heat pumps and other energy-efficient appliances. The site also guides users on how to apply for these rebates, ensuring that they maximize their financial benefits while making sustainable upgrades to their homes.
- EPA Clean Energy Financing Toolkit for Decisionmakers
The Clean Energy Financing Toolkit for Decisionmakers Toolkit offers an overview of clean energy financing options across energy efficiency, renewable energy, electrification, and sustainable transportation. It helps decisionmakers understand different financing models, view examples from state and local governments, and access additional resources to support investment in clean energy initiatives. This resource is designed to guide the development of effective funding strategies to accelerate the transition to clean energy.