A heat pump installation in 2024 costs $12,000–$25,000 for a typical US home, before incentives. After the federal incentives that became fully effective in 2023, the same installation can net out at $6,000–$15,000 for many households — sometimes less.
The catch: there are three different federal incentives that don't freely stack, plus state rebates that vary 10× by jurisdiction. Most homeowners read one source and miss the others.
Section 25C (Energy Efficient Home Improvement Credit)
Air-source heat pumps qualify for a non-refundable tax credit of 30% of the cost, capped at $2,000 per year. You can claim it every year you make qualifying improvements, so a multi-year electrification project (heat pump in 2024, heat pump water heater in 2025) gets two separate $2k credits.
The unit must meet specific efficiency requirements (HSPF2 ≥ 7.5 for split systems in northern climates, with regional variants). Random off-the-shelf units don't qualify; the manufacturer has to certify.
Section 25D (Residential Clean Energy Credit)
Geothermal (ground-source) heat pumps qualify for 30% of cost, with NO cap. This is huge for high-end installs. A $30,000 geothermal install nets $9,000 in federal tax credit alone.
Section 25D is non-refundable but carries forward indefinitely — so even if your tax liability is too small to absorb it this year, you bank the credit for future years.
HEEHRA (High-Efficiency Electric Home Rebate Act)
HEEHRA is income-tested. Households at or below 80% of area median income (AMI) get up to $8,000 in rebates for a heat pump. Households between 80–150% AMI get up to 50% of project cost reimbursed.
Rebates are administered by states, with rollout uneven — some states began accepting HEEHRA applications in 2024, others in 2025. Check your state energy office. Crucially, HEEHRA rebates and Section 25C credits can stack.
A low-income household stacking HEEHRA ($8k) + 25C ($2k) on a $14k air-source heat pump install pays $4k out of pocket. The same install for a high-income household with no HEEHRA eligibility pays $12k.
Cold-climate heat pumps work below 0°F
A common myth: heat pumps stop working in cold weather. This was true of 1990s technology. Modern cold-climate heat pumps (ENERGY STAR Cold Climate certified) maintain rated capacity at 5°F and operate down to -15°F. Some Mitsubishi and Daikin units operate to -22°F.
For climate zones 1–4 (most of the southern US), any heat pump works. For zones 5–6 (Midwest, Northeast), specify a cold-climate unit. For zones 7–8 (rare; northern Maine, Alaska), heat pumps still work but consider a backup heat source for the coldest weeks.
The payback math vs gas
Operating cost depends on local electricity vs gas prices. In 2024, heat pumps beat gas heating in:
- Most of the West Coast (cheap hydro electricity, expensive gas)
- New England (very expensive heating oil, moderate electricity)
- Most of the South (mild winters, low heating load)
Heat pumps lose to gas in: the upper Midwest with very cheap gas (Iowa, Nebraska), rural areas with propane (varies), and homes with old electric resistance baseboards being replaced with new electric resistance (heat pumps win against electric resistance always).
Simple payback period for upgrading from gas: 7–15 years, depending on incentive stack and local prices. Switching from oil or electric resistance: 3–7 years.
Our heat pump sizing calculator does climate-zone-aware sizing for IECC zones 1–8, computes Section 25C/25D credits, HEEHRA rebate eligibility by income tier, and operating cost vs your current fuel (gas, oil, propane, electric, wood). Output: simple payback period and 15-year savings projection.