- What Heat Pump Incentives Are Available Right Now?
- The SMUD Rebate Breakdown
- What Does a Conversion Actually Cost?
- Is the SMUD HVAC Rebate the Same Thing?
- How Do You Qualify for the SMUD Rebate?
- Is It Still Worth Switching From Gas?
- Heat Pump Tradeoffs: What to Know Before You Commit
- Roseville Electric and PG&E: Getting Your Numbers
- What Should You Do Right Now?
- Frequently Asked Questions
The federal heat pump tax credit is gone. The One Big Beautiful Bill Act (Public Law 119-21), signed July 4, 2025, terminated Section 25C effective December 31, 2025. No federal credit exists for heat pump systems installed in 2026. That's the truth, and you deserve to hear it upfront.
The good news: the local money is real, and it's the biggest it has been. SMUD's top heat pump rebate stands at $3,000 for qualifying gas-to-electric conversions. Stack the SMUD panel upgrade bonus on top, and a qualifying Sacramento homeowner can recover up to $5,000 without any federal involvement.
This guide covers exactly what's available in 2026, what's gone, and how to qualify for every dollar still on the table. For a side-by-side breakdown of heat pump vs. gas furnace operating costs, see our heat pump vs gas furnace guide for Sacramento.
Key Takeaways
- The federal §25C heat pump tax credit expired December 31, 2025 — no credit for 2026 installs
- SMUD's top rebate is $3,000 for variable-speed, gas-to-electric conversions (verified against SMUD's rebate page, August 2026)
- Stacking the SMUD HVAC rebate with the Go Electric panel bonus reaches up to $5,000
- SMUD publishes what conversions actually cost: the median gas-to-electric heat pump installation in its program runs $18,804, refreshed quarterly from real customer projects. Our own installed heat pump replacements run $4,300 to $14,300.
- HEEHRA / TECH Clean California is suspended and not accepting new applications — don't plan around it
- Rocky Mountain Institute (2023) reports air-source heat pumps deliver 2–4x more heating energy than the electricity they consume — efficiency no gas furnace can match
What Heat Pump Incentives Are Available in California Right Now?
The honest 2026 answer is one major program: SMUD's heating and cooling rebate, up to $3,000 for qualifying gas-to-electric conversions (SMUD.org Heating and Cooling Rebates, retrieved August 2026). The federal §25C tax credit that powered many previous upgrade decisions expired December 31, 2025. The state HEEHRA / TECH Clean California program is suspended. SMUD is where Sacramento homeowners should focus first.
SMUD's Heating and Cooling rebate pays $3,000 for a variable-speed gas-to-electric heat pump conversion, $2,000 for a two-stage system, and $1,000 for an electric-to-electric upgrade, with a stackable $2,000 Go Electric panel bonus — up to $5,000 total. Rebates are subject to availability of funding and must be submitted by a participating contractor. (Source: SMUD.org, retrieved August 2026)
What the Federal Credit Was — and Why It's Over
The §25C tax credit allowed homeowners to claim 30% of installation costs, up to $2,000 per year for qualifying heat pumps placed in service between January 1, 2023 and the end of 2025 (IRS, Energy Efficient Home Improvement Credit). It reduced your federal tax bill dollar-for-dollar — one of the strongest residential energy incentives in recent memory.
Congress eliminated it. The One Big Beautiful Bill Act (signed July 4, 2025) terminated §25C at the end of 2025. If you had a system installed in 2025, you can still claim that credit on your 2025 tax return — file with Form 5695 as normal. But for anything installed January 1, 2026 or later, there is no federal tax credit. Not reduced, not phased down. Gone.
In the months after the OBBBA passed, we fielded more calls about this than almost any other topic. Homeowners had planned upgrades around that credit. Many were understandably frustrated. The SMUD rebate increase doesn't replace it dollar-for-dollar for every system type, but it's real money with a clear path to claim it.
What About HEEHRA and TECH Clean California?
The High-Efficiency Electric Home Rebate Act (HEEHRA) — administered in California through TECH Clean California — was funded to help low- and moderate-income households with heat pump upgrades. The program had real potential: up to $8,000 for qualifying households below 80% of area median income.
Single-family reservations were fully exhausted in early 2026, and the program has since been suspended — it is not accepting new applications. If you already hold a reservation, confirm its status with the program administrator before counting on the money.
Don't count on it for planning purposes right now. SMUD is the bankable program.
The SMUD Rebate Breakdown: Current Tiers for 2026
SMUD's current rebate tiers reward higher-efficiency systems with higher payouts. These figures come directly from SMUD's Heating and Cooling Rebates page (SMUD.org, re-verified August 2026).
| System Type | Conversion Type | Minimum Efficiency | SMUD Rebate |
|---|---|---|---|
| Variable-speed heat pump | Gas-to-electric | 15.2 SEER2 | $3,000 |
| Two-stage heat pump | Gas-to-electric | 15.2 SEER2 | $2,000 |
| Any qualifying heat pump | Electric-to-electric | 15.2 SEER2 | $1,000 |
| Go Electric panel upgrade | Stackable bonus | N/A | $2,000 |
The Go Electric panel bonus is stackable. A homeowner converting from a gas furnace to a variable-speed heat pump who also upgrades their electrical panel can claim $3,000 + $2,000 = $5,000 from SMUD alone. No income restriction applies to these tiers.
In our experience working with Sacramento homeowners on gas-to-electric conversions, the panel upgrade is often necessary anyway. Many older Sacramento homes — particularly those built in the 1960s and 1970s in Fair Oaks — have 100-amp panels that need upgrading to support a heat pump's startup load. The $2,000 Go Electric bonus frequently covers a significant portion of that panel work. Check our current specials and promotions for any additional Alpha Mechanical offers.
What Does a Heat Pump Conversion Actually Cost in Sacramento?
The median gas-to-electric heat pump conversion in Sacramento costs $18,804 installed — and that figure isn't an estimate. SMUD publishes it from actual customer projects in its own rebate program, covering the past 12 months and refreshed every quarter (SMUD.org, retrieved August 2026). It's the only first-party install-price dataset that exists for this market, and it's worth more than any national cost guide.
Here is SMUD's published median pricing by system category:
| System Category | Gas-to-Electric Conversion | Electric-to-Electric Upgrade |
|---|---|---|
| All projects (median) | $18,804 | $17,336 |
| Split system | $18,646 | $17,006 |
| Package system | $19,218 | $18,975 |
| Mini-split system | $19,584 | $17,147 |
| Ducted | $21,296 | $19,703 |
| Ductless | $15,980 | $14,842 |
The spread is wide — SMUD's program projects range from $3,500 to $65,620 for gas-to-electric conversions — because scope varies wildly. A conversion can mean anything from a straightforward equipment swap to a full job with panel upgrade, duct replacement, and structural work.
<!-- [ORIGINAL DATA] --> For calibration against those program medians: our own installed heat pump replacements run **$4,300 to $14,300**, based on Alpha Mechanical's 2026 job data. Our range sits below the program medians mostly because it includes like-for-like heat pump replacements and simpler conversions, while SMUD's dataset skews toward full gas-to-electric projects that bundle panel and duct work. The honest takeaway: get a scoped quote, because "a heat pump costs $X" is meaningless without knowing what your home needs.The rebate math against the median: an $18,804 conversion minus the $3,000 variable-speed rebate and $2,000 panel bonus nets out around $13,800 — roughly a quarter of the cost recovered before financing enters the picture.
Is the SMUD HVAC Rebate the Same as the Heat Pump Rebate?
Yes — and that catches people out. SMUD's HVAC rebate is its Heating and Cooling rebate, and every tier in it pays for a heat pump. There is no SMUD rebate for replacing a gas furnace with another gas furnace, and none for swapping a straight air conditioner for another straight air conditioner. The rebate exists to move homes off gas heat, so the equipment has to be able to heat as well as cool.
That distinction decides whether a replacement quote comes with rebate money attached:
- Gas furnace and AC replaced with a heat pump — the gas-to-electric tiers apply: $3,000 variable-speed, $2,000 two-stage.
- Old electric heat pump replaced with a new one — the electric-to-electric tier applies: $1,000.
- Gas furnace replaced with a gas furnace — no SMUD HVAC rebate.
- Straight AC replaced with straight AC — no SMUD HVAC rebate.
If you are already facing a replacement, that gap is worth knowing before you choose equipment. The rebate can be the difference that makes a heat pump the cheaper option up front, not just over time. Our guide to what drives HVAC replacement decisions covers the rest of the tradeoff.
How Do You Qualify for the SMUD Heat Pump Rebate?
Eligibility is straightforward, but specific. SMUD requires all five conditions be met before a rebate is paid. Missing any one of them disqualifies the project.
| Requirement | Details |
|---|---|
| Active SMUD account | Property must be in SMUD's service territory (Sacramento County + parts of Placer County) |
| SMUD-licensed contractor | Installation must be done by a contractor in SMUD's licensed network |
| Variable or two-stage system | Single-stage systems do not qualify for the $2,000 or $3,000 tiers |
| Minimum 15.2 SEER2 efficiency | System must meet or exceed the 2023 DOE efficiency standard |
| Permit pulled | A building permit must be obtained for the installation |
One note on the contractor requirement: SMUD has a list of pre-approved contractors. Your installer should be able to confirm their SMUD license status before you sign anything. If they can't confirm it, ask for documentation. The rebate gets submitted through the contractor — not directly by the homeowner — so this step matters.
Get a free quote from Alpha Mechanical and we'll confirm your SMUD eligibility before any work begins.
How to Apply for the SMUD Heat Pump Rebate: Step by Step
The application process runs through your installing contractor, not through a government portal. Here's how it works:
Step 1 — Confirm eligibility. Verify your address is in SMUD territory (smud.org has an address lookup tool). Confirm your existing system qualifies as a gas-to-electric conversion if you're targeting the $2,000 or $3,000 tier.
Step 2 — Select a SMUD-licensed contractor. Ask any HVAC contractor you're considering whether they are in SMUD's rebate program. This is a yes-or-no question with a verifiable answer.
Step 3 — Pull the permit. Your contractor should handle this. Don't skip it. SMUD requires a permit to process the rebate.
Step 4 — Complete installation. The contractor installs the system and retains documentation of the equipment's SEER2 rating, model number, and serial number.
Step 5 — Submit the rebate application. The contractor submits on your behalf through SMUD's online portal. Processing time is typically 6–8 weeks from submission. The rebate arrives as a check or bill credit.
Is It Still Worth Switching From Gas to a Heat Pump in 2026?
Yes — and the efficiency math hasn't changed just because the federal credit expired. According to Rocky Mountain Institute (RMI, July 2023), an air-source heat pump delivers two to four times more heating energy than the electricity it consumes. They move heat rather than generate it, which is fundamentally more efficient than burning fuel — and Sacramento's mild winters keep them operating near the top of that range.
Sacramento's climate makes this comparison particularly favorable. Fair Oaks regularly hits 100°F or above during summer, and cooling costs are a real burden. A heat pump handles both heating and cooling in a single system. The heating-side concern — "won't it struggle in cold weather?" — rarely applies here. Sacramento temperatures almost never drop below 30°F, which is well above the threshold where modern heat pumps start losing efficiency.
The economics of switching look different in 2026 than they did in 2024, but not necessarily worse. The federal credit was worth up to $2,000. SMUD's top tier is $3,000 — $1,000 more than the credit for qualifying variable-speed conversions. Homeowners who delayed an upgrade waiting for better incentives may actually be in a stronger position now, assuming they're in SMUD territory and converting from gas.
The upfront cost of a heat pump system remains higher than a like-for-like gas furnace replacement. SMUD's own published project data puts the median gas-to-electric conversion at $18,804, and our installed heat pump replacements run $4,300 to $14,300 depending on scope — the full breakdown is in the cost section above, and our guide to HVAC system replacement costs covers the gas-equipment side. The SMUD rebate meaningfully reduces that gap.
Heat Pump Tradeoffs: What to Know Before You Commit
No honest contractor will tell you heat pumps are perfect for every situation. They're excellent for most Sacramento homes, but there are real tradeoffs worth understanding before you commit.
Higher upfront cost. A heat pump system costs more to purchase and install than a gas furnace or standard air conditioner. The SMUD rebate helps, but the gap doesn't disappear entirely.
Cold-weather output. Heat pumps move existing heat from outdoor air into your home. When outdoor temperatures fall significantly, there's less heat to move and efficiency drops. In most of Sacramento and Fair Oaks, this is rarely a practical problem — winters are mild. But if you're at a higher elevation in the Sierra foothills, ask your contractor specifically about low-ambient performance ratings.
"My house feels cold with a heat pump." This is one of the most common complaints from homeowners who switch from gas. It's not the system malfunctioning — it's how heat pumps work. A gas furnace blows air at 120–140°F. A heat pump blows air at 90–100°F, which feels cooler even though it's still warming your home. The room temperature gets where it needs to go, but the air coming from the vents doesn't feel as hot. Some homeowners adjust immediately. Others find it takes a season.
Electric rate dependency. If electricity rates in your area are high relative to gas, the operating cost advantage narrows. Check your current electric rate with SMUD — in our experience most Sacramento customers on standard residential rates come out ahead on operating costs with a heat pump, because the 2–4x efficiency multiplier leaves a lot of headroom before electric rates erode the advantage.
Understanding these tradeoffs before installation prevents disappointment. A contractor who only talks about benefits and never mentions limitations probably isn't the right contractor for you.
Roseville Electric and PG&E: Getting Your Numbers
Not every Sacramento-area home is in SMUD territory. Roseville Electric and PG&E also serve parts of the region, and both have offered heat pump incentives in the past.
Roseville Electric publishes its heat pump HVAC amounts, and what you get depends on what you are replacing. Verified against the City of Roseville rebate catalogue on 22 August 2026:
| Replacing | System installed | Rebate |
|---|---|---|
| Gas furnace / AC | Variable-stage heat pump | $2,500 |
| Gas furnace / AC | Two-stage heat pump | $1,500 |
| Existing heat pump | Variable-stage heat pump | $1,600 |
| Existing heat pump | Two-stage heat pump | $600 |
The program minimums are 16 SEER / 8.2 HSPF for a split system, 15 SEER / 8.0 HSPF packaged, a two-stage compressor, and ductwork that passes Title 24 via a HERS CF3R. Rebates are limited to two systems per household, you need a City of Roseville building permit, and rebates over $600 are reported to the IRS on a 1099. Current terms are on the Roseville Electric residential rebates page.
PG&E amounts are a different matter. Its Comfortable Home Rebates program is pay-for-performance on a whole-home retrofit rather than a fixed figure per system, so there is no dollar amount worth quoting here. Call PG&E, or ask your contractor to model it, and ask specifically: is the program currently funded and accepting applications, and what does my house actually qualify for?
What Should Sacramento Homeowners Do Right Now?
The incentive landscape shifted fast in 2025–2026. The federal credit vanished. HEEHRA went to a waitlist, then suspension. SMUD's rebate is the program left standing — funded and active — but SMUD's own page notes rebates are subject to funding availability, so the current $3,000 tier isn't guaranteed indefinitely.
If you've been considering a heat pump replacement and you're in SMUD territory, 2026 is a real window. The combination of SMUD's $3,000 top-tier rebate, the Go Electric panel bonus, and a favorable Sacramento climate for heat pump performance makes the decision more financially defensible than it's been in years — despite the federal credit being gone.
A few things to do before you call anyone:
- Confirm your address is in SMUD's service territory at smud.org.
- Verify your current system is gas-powered — gas-to-electric conversions qualify for the higher $2,000 and $3,000 tiers.
- Ask any contractor you interview whether they are in SMUD's rebate program and can confirm their SMUD license number.
- Make sure the permit gets pulled — it's required for the rebate.
If you want a straight answer on whether your specific home qualifies, what system would be appropriate, and what the total cost looks like after rebates, contact us for a free quote. We'll walk through the numbers honestly. Alpha Mechanical serves Sacramento, Fair Oaks, and the surrounding region. If you're replacing because the current AC runs without cooling, check the Sacramento AC-not-cooling diagnostic guide first, and review our HVAC replacement guidelines before signing any bid.
Frequently Asked Questions
What HVAC system qualifies for a federal tax credit in 2026?
Nothing qualifies for a federal heat pump tax credit in 2026. The §25C credit, which allowed a 30% credit up to $2,000 for qualifying heat pumps, was terminated by the One Big Beautiful Bill Act (signed July 4, 2025) effective December 31, 2025. There is no federal tax credit for HVAC systems installed in 2026 or later.
How did the $2,000 heat pump tax credit work?
The §25C credit applied to heat pump installations completed in tax years 2023, 2024, and 2025. Homeowners could claim 30% of installation costs, up to a $2,000 maximum, directly against their federal tax liability using IRS Form 5695. It no longer applies to installations made in 2026 or later.
What is the California heat pump rebate for 2026?
The primary available rebate for most Sacramento-area homeowners is SMUD's heating and cooling rebate: $3,000 for variable-speed gas-to-electric conversions, $2,000 for two-stage gas-to-electric conversions, and $1,000 for electric-to-electric upgrades (SMUD.org, retrieved August 2026). The state HEEHRA / TECH Clean California program is suspended.
Does California offer rebates for heat pumps in 2026?
Yes. SMUD offers rebates up to $3,000 for qualifying heat pump installations in its service territory (Sacramento County and parts of Placer County). The TECH Clean California / HEEHRA program is suspended and not accepting new applications. Roseville Electric pays $2,500 for a variable-stage heat pump replacing a gas furnace or AC, $1,500 for two-stage, $1,600 to replace an existing heat pump with a variable-stage unit and $600 for two-stage (verified 22 August 2026). PG&E’s Comfortable Home Rebates is pay-for-performance on a whole-home retrofit, so confirm that amount with PG&E directly.
Can I write off my new heat pump or AC on my taxes in 2026?
No. The §25C energy-efficiency home improvement credit expired December 31, 2025. There is currently no federal tax credit or deduction for residential heat pump or HVAC installations in 2026. SMUD utility rebates are still available but are rebates, not tax credits.
Is it worth switching from a gas furnace to a heat pump in 2026?
For most Sacramento homeowners, yes. Rocky Mountain Institute's 2023 heat pump analysis reports that air-source heat pumps deliver 2–4 times more heating energy than the electricity they consume — efficiency no gas furnace can match. SMUD's $3,000 rebate plus the $2,000 Go Electric panel bonus provides up to $5,000 in confirmed incentives for qualifying gas-to-electric conversions.
Why does my house feel cold with a heat pump?
Gas furnaces blow air at roughly 120–140°F. Heat pumps typically deliver supply air at 90–100°F. Your home heats to the same target temperature, but the air from the vents feels cooler by comparison. This is normal heat pump operation, not a malfunction. Most homeowners adjust within a season.
What are the disadvantages of heat pumps?
The main tradeoffs are higher upfront cost compared to gas equipment, reduced efficiency at very low outdoor temperatures (rarely an issue in Sacramento's mild winters), and supply air that feels cooler than gas heat. Operating costs are typically lower year-round in Sacramento's climate, particularly for homes doing significant cooling in Fair Oaks' 100°F+ summers.
How much does a gas-to-electric heat pump conversion cost in Sacramento?
The median conversion in SMUD's rebate program costs $18,804 installed, per SMUD's published data from actual customer projects (refreshed quarterly; retrieved August 2026). Projects range from $3,500 to $65,620 depending on scope, with ductless systems cheapest (median $15,980) and fully ducted highest ($21,296). Alpha Mechanical's own installed heat pump replacements run $4,300 to $14,300. Up to $5,000 in SMUD rebates offsets a qualifying conversion.
Can I stack SMUD rebates with other programs?
Yes. The SMUD HVAC rebate and the Go Electric panel upgrade bonus are stackable. A homeowner converting from gas to a variable-speed heat pump who also upgrades their electrical panel can claim $3,000 (HVAC) plus $2,000 (panel) for a total of $5,000. Both require the same SMUD-licensed contractor and permit. No income restriction applies to these tiers (re-verified August 2026).
How long does the SMUD rebate take to arrive?
Typically 6–8 weeks from the date your contractor submits the completed application. SMUD pays by check or bill credit. Your contractor should confirm submission and provide a confirmation number. If you haven't heard anything after 10 weeks, contact SMUD directly with that confirmation number.