Can I Get Rebates for Replacing Gas Furnace With Heat Pump? Your Complete Guide
If you're wondering whether you can get rebates for ditching your gas furnace and switching to a heat pump, here's the good news: Yes, absolutely! In fact, this is exactly the type of home upgrade that federal and state rebate programs were specifically designed to encourage.
Replacing a gas furnace with a heat pump is called "fuel switching" or "electrification," and it's one of the most impactful ways to reduce both your carbon footprint and your long-term energy costs. The Inflation Reduction Act created several programs that make this transition more affordable than ever, with combined incentives potentially covering a substantial portion of your project costs.
Here's everything you need to know about getting rebates for your gas-to-electric heating conversion.
Why This Upgrade Qualifies for Maximum Rebates
The federal government and many states are actively encouraging homeowners to move away from fossil fuel heating systems. Here's why your gas furnace replacement is the ideal rebate scenario:
Federal programs specifically target fuel switching:
- The HOMES rebate program (Home Efficiency Rebates) provides rebates based on energy savings achieved (Energy.gov HOMES Program)
- The HEEHRA program (High-Efficiency Electric Home Rebate Act) offers rebates specifically for heat pump installations that replace fossil fuel systems (Energy.gov HEEHRA Program)
- The 25C tax credit provides 30% back (up to $2,000) on qualifying heat pump equipment (IRS Energy Efficient Home Improvement Credit)
Your project likely qualifies for multiple programs: Unlike some home improvements that only qualify for one incentive, a gas furnace to heat pump conversion often stacks multiple rebates. This happens because:
- You're improving energy efficiency (HOMES eligible)
- You're electrifying your heating system (HEEHRA eligible)
- You're installing qualifying equipment (25C tax credit eligible)
- Many states offer additional incentives for electrification
Real Cost Example: What You Could Actually Pay
Let's walk through a realistic scenario for a typical 2,000 square foot home:
Project Costs:
- Heat pump system (3-ton): $12,000
- Electrical panel upgrade (if needed): $3,000
- Gas line capping and removal: $500
- Total project cost: $15,500
Potential Available Rebates:
- Federal 25C tax credit (30% of equipment, up to $2,000): $2,000
- HOMES rebate (varies by energy savings achieved): $2,000-$8,000
- State heat pump rebate (varies significantly by location): $500-$3,000
- Utility company incentive (varies by provider): $500-$2,000
- Total potential rebates: $5,000-$15,000 (depending on location and program availability)
Your actual out-of-pocket cost could range from $500 to $10,500
The exact amount depends on your state's program implementation, your income level, and the energy savings your specific project achieves.
And remember: you're also eliminating your monthly gas bill, which averages $50-$150 per month depending on your climate and usage. That's $600-$1,800 in annual savings that continues year after year.
The Three Main Federal Programs You Can Use
1. Federal Heat Pump Tax Credit (25C)
The Energy Efficient Home Improvement Credit allows you to claim 30% of the cost of qualifying heat pump equipment, up to a maximum of $2,000 per year (IRS.gov).
Key details:
- Covers heat pumps with HSPF2 rating of 7.8 or higher
- Applies to equipment costs only (not installation labor)
- Claimed on your tax return for the year of installation using Form 5695
- No income restrictions
- Available through at least December 31, 2032 per current law
2. HOMES Rebate Program
The Home Energy Rebates program provides point-of-sale rebates based on the energy savings your project achieves (Energy.gov HOMES).
Key details:
- Rebate amounts based on modeled energy savings (typically ranging from $2,000 to $8,000 for significant whole-home improvements)
- Available to homeowners regardless of income level
- Paid directly at time of purchase or shortly after (not a tax credit)
- Requires energy modeling before and after the project
- Implementation varies by state—check your state energy office for current status
Important: Replacing a gas furnace with a heat pump typically achieves significant whole-home energy savings, potentially qualifying you for substantial rebates through this program. The exact amount depends on your home's characteristics and the energy modeling results.
3. HEEHRA (High-Efficiency Electric Home Rebate Act)
This program specifically targets electrification and prioritizes low- to moderate-income households (Energy.gov HEEHRA).
Key details:
- Rebates available for heat pump installation (amounts vary by state program)
- Additional rebates for electrical panel upgrades (often needed when switching from gas)
- Additional rebates for electrical wiring improvements
- Income eligibility requirements vary by state (generally targeting households under 150% Area Median Income)
- Higher rebate coverage percentages for lower-income households
Note: State HEEHRA programs are in various stages of implementation. As of early 2025, many states are launching or preparing to launch their programs. Check your state energy office website for current status and specific rebate amounts in your area.
What About Electrical Upgrades?
Here's an important consideration many homeowners miss: your electrical system may need upgrades when switching from gas to electric heating.
Common electrical upgrades needed:
-
Panel upgrade (100-amp to 200-amp): $2,000-$4,000
- Required if your current panel can't handle the additional load
- May be covered by HEEHRA rebates (check your state program)
- Also qualifies for 25C tax credit (30%, up to $600) (IRS.gov)
-
Dedicated circuit installation: $500-$1,500
- Heat pumps require a dedicated 240V circuit
- Usually included in installation costs
- May qualify for HEEHRA wiring rebates in some states
-
Meter upgrade: $0-$500
- Sometimes required by utility company
- Often covered by utility at no cost
Good news: These necessary electrical upgrades may also be eligible for rebates through HEEHRA and the 25C tax credit, reducing the overall cost of your project.
State and Utility Rebates Stack On Top
Beyond federal programs, most states and utilities offer additional incentives for heat pump installations and electrification:
State programs typically offer:
- Rebates ranging from $500 to several thousand dollars for heat pump installations
- Additional bonuses for fuel switching (replacing gas/oil systems)
- Enhanced rebates in certain climate zones
- Income-qualified program enhancements
Utility company incentives include:
- Instant rebates (amounts vary by utility)
- Free or discounted energy audits
- Contractor referral programs
- Time-of-use rate discounts for heat pump users
Example stacking scenario:
- Federal 25C credit: $2,000
- HOMES rebate: $4,000
- State heat pump rebate: $2,000
- Utility instant rebate: $1,000
- Total: $9,000 off a typical $12,000-$15,000 project
Note: Actual rebate amounts vary significantly by location and program availability. Use our Rebate Calculator to estimate incentives available in your specific area.
The Process: How to Actually Get These Rebates
Getting your rebates requires some planning, but the savings make it worthwhile. Here's the step-by-step process:
1. Get a pre-project energy assessment (for HOMES)
- Required for HOMES rebate program
- Energy auditor models your current home's energy use
- Costs $200-$500 (often rebated through the program)
- Establishes baseline for calculating savings
2. Get quotes from rebate-certified contractors
- Not all contractors are certified for rebate programs
- Look for contractors registered with your state's HOMES program
- Get 2-3 quotes to compare pricing and equipment
3. Verify equipment qualifications
- Ensure heat pump meets ENERGY STAR and program requirements
- Confirm HSPF2 rating of 7.8+ for 25C credit
- Check that contractor will handle rebate paperwork
4. Apply for rebates BEFORE installation
- HOMES and HEEHRA typically require pre-approval or registration
- Submit applications with contractor's quote
- Follow your state's specific application process
5. Complete installation
- Use approved contractor
- Keep all receipts and documentation
- Schedule post-project energy assessment (for HOMES)
6. Claim your incentives
- HOMES/HEEHRA: paid directly at purchase or shortly after completion
- 25C tax credit: claimed on next year's tax return (Form 5695)
- State/utility rebates: follow specific program procedures
Common Questions About Gas Furnace Replacement
Do I need to remove my gas line? Not necessarily. Many homeowners cap the gas line rather than removing it entirely, keeping it available for gas appliances like ranges or water heaters. However, some rebate programs may offer additional incentives for complete gas service disconnection. Check your specific program requirements.
Can I keep my gas furnace as backup? Technically yes, but this may affect your rebate eligibility. Some electrification programs require complete fuel switching to qualify for maximum rebates. Check specific program requirements in your state.
What if my home has radiators or baseboard heat? Heat pumps work differently than traditional gas furnaces. If you have radiators or baseboard heat, you'll likely need to install ductwork or switch to ductless mini-split heat pumps. Both approaches qualify for rebates, but costs and optimal solutions vary.
How long does the installation take? Typical installation takes 2-5 days depending on complexity:
- Day 1: Electrical work and panel upgrades (if needed)
- Days 2-3: Heat pump installation
- Days 4-5: Testing, gas line work, and final inspections
Will a heat pump work in cold climates? Modern cold-climate heat pumps work efficiently down to -15°F or lower. Many models maintain 100% heating capacity at 5°F and continue operating (with reduced efficiency) well below zero. If you live in an extremely cold climate, you might keep your gas furnace as emergency backup, though this may affect rebate eligibility.
Real Homeowner Example: Complete Cost Breakdown
Sarah's 1,800 sq ft home in Colorado:
Before:
- 20-year-old gas furnace
- $120/month average gas bill
- $1,440/year in gas costs
Project costs:
- 2.5-ton cold-climate heat pump: $11,000
- Electrical panel upgrade (100A to 200A): $3,200
- Gas line capping: $400
- Total: $14,600
Rebates received:
- Federal 25C tax credit: $2,000
- HOMES rebate (based on energy savings): $4,000
- Colorado state rebate: $1,800
- Utility instant rebate: $1,200
- Panel upgrade covered by additional rebates: $3,200
- Total rebates: $12,200
Sarah's actual cost: $2,400
Annual savings:
- Eliminated gas bill: $1,440/year
- Lower electric heating costs vs. gas: $300/year
- Total annual savings: $1,740/year
Payback period: 1.4 years
After that, Sarah saves $1,740 every year while enjoying better comfort, improved air quality, and air conditioning in summer.
Note: This is an illustrative example. Actual costs and rebates vary by location, contractor, equipment choices, and program availability.
Important Timing Considerations
Current program status:
The federal 25C tax credit is available through at least December 31, 2032, under current law (IRS.gov). State HOMES and HEEHRA programs are in various stages of implementation across the country, with many states launching programs throughout 2025.
What this means for you:
- Federal tax credits are currently available for qualifying installations
- State rebate programs vary by location—check your state energy office website for current status
- Some state programs may have limited funding distributed on a first-come, first-served basis
- Getting quotes and starting the process now helps ensure you don't miss available incentives
Action steps:
- Check your state's HOMES program status at your state energy office website
- Verify HEEHRA program availability in your area
- Contact local contractors about current rebate processing times
- Consider scheduling energy assessments before peak season
Next Steps: Getting Started
Ready to replace your gas furnace with a heat pump and claim your rebates? Here's what to do:
- Calculate your potential savings: Use our Rebate Calculator to estimate your specific incentives based on location and income
- Check your state's program status: Visit your state energy office website for current HOMES and HEEHRA information
- Get a home energy assessment: Required for HOMES rebates and helps identify other efficiency opportunities
- Find rebate-certified contractors: Look for installers registered with your state's rebate programs who specialize in heat pump installations
- Compare quotes: Get 2-3 detailed quotes that include rebate processing assistance
The bottom line: Replacing your gas furnace with a heat pump is one of the most financially rewarding home improvements you can make right now. With federal, state, and utility incentives potentially stacking together, many homeowners are significantly reducing their out-of-pocket costs while eliminating their gas bills.
The combination of available rebates, long-term energy savings, and improved home comfort makes this upgrade a smart financial decision—and the environmental benefits are just a bonus.