Do Heat Pump Rebates Expire? Understanding Deadlines and Program Timelines

You've done your research. You know heat pumps can slash your energy bills while keeping your home comfortable year-round. You've even calculated that between federal tax credits and state rebates, you could save $6,000 to $14,000 on your installation.

But there's one critical question keeping you up at night: Will these rebates still be available when you're ready to buy?

The short answer: It depends on which programs you're counting on. Federal tax credits have clear expiration dates. State and utility rebates? They're often funded on a first-come, first-served basis and can run out unexpectedly—sometimes mid-year.

Here's everything you need to know about heat pump rebate timelines so you can plan your upgrade with confidence.

Federal Heat Pump Tax Credits: The Long Game

The good news? Federal tax credits offer the most predictable timeline.

25C Energy Efficient Home Improvement Credit

Current Status (as of November 2025): The 25C tax credit for heat pumps is currently authorized through December 31, 2032 under the Inflation Reduction Act, according to the latest IRS guidance. IRS.gov

What it covers:

• $2,000 tax credit for qualifying heat pump installations
• Applies to both air-source and geothermal heat pumps
• No lifetime limit—you can claim it every year through 2032
• Must meet ENERGY STAR Most Efficient or CEE Tier 2 requirements

Important caveat: While the program is currently scheduled through 2032, tax legislation can change. The Inflation Reduction Act provisions could be modified by future Congressional action. For the most current information and any legislative updates, always check IRS.gov before making purchase decisions.

Installation timing matters: You must complete installation and file your tax return by April 15 of the following year to claim the credit for a given tax year. If you install in December 2025, you'll claim it on your 2025 return filed in early 2026.

25D Residential Clean Energy Credit (Geothermal)

For geothermal heat pumps specifically:

• 30% of total installation costs (no cap)
• Currently scheduled through December 31, 2032 under the Inflation Reduction Act IRS.gov
• The credit percentage is scheduled to step down in subsequent years, though the exact percentages should be verified at IRS.gov as legislation can change

The takeaway? Federal tax credits give you a multi-year planning window, but the most generous incentives are available now.

State Rebates: The Race Against the Clock

This is where timing gets critical—and complicated.

How State HOMES and HEEHRA Programs Work

Most state rebate programs funded by the Inflation Reduction Act operate on allocated funding models:

HOMES (Home Owner Managing Energy Savings):

• Accepts all income levels
• Enhanced rebates for households earning ≤80% Area Median Income (AMI)
• Standard rebates for households earning >80% AMI
• Typical funding: $5,000-$8,000 for qualifying heat pump projects
• First-come, first-served until state funds are depleted

HEEHRA (High-Efficiency Electric Home Rebate Act):

• Income-restricted program (≤150% AMI)
• Up to $8,000 for heat pump installations (≤80% AMI)
• Up to $4,000 for moderate-income households (80-150% AMI)
• Also first-come, first-served

The "Funding Cliff" Problem

Here's what makes state rebates unpredictable: Each state received a one-time allocation of federal funding. When it's gone, it's gone—unless the state legislature adds more money.

Real-world example: Colorado's heat pump rebate program has experienced overwhelming demand, with initial funding allocations exhausting within months of launch. Homeowners who waited to apply found themselves on waitlists or unable to access funds. Colorado Energy Office

What this means for you:

• Don't assume funds will be available next quarter or next year
• State programs typically don't announce "running low" warnings until it's too late
• Application processing can take 4-8 weeks, so plan accordingly

State Program Status Varies Dramatically

As of November 2025, state rebate programs are at different stages of rollout:

Fully launched and accepting applications:

• New York, Arizona, New Mexico (among others)
• Check your specific state's energy office website

In development or pilot phase:

• Many states are still finalizing program rules
• Some have soft-launched with limited capacity

The best resource: Visit Energy.gov's State-by-State Rebate Tracker for current status in your area.

Utility Company Rebates: The Wild Card

Utility rebates add another layer of complexity—and opportunity.

Typical characteristics:

• Annual budget cycles: Most utilities allocate rebate funds each calendar or fiscal year
• Can run out mid-year: Popular programs may exhaust funds by summer
• Vary by service territory: Your neighbor across the street might have different incentives if they're served by a different utility
• May require pre-approval: Some utilities want you to apply before purchase

Example timing issues:

• A utility might offer $1,500 for heat pump installations but only fund 200 rebates per year
• By June, they've hit their cap and stop accepting applications
• You have to wait until January for the next budget cycle

Pro tip: Call your utility company's energy efficiency department directly. Ask:

1. What's the current rebate amount?
2. How much funding remains this year?
3. Do I need pre-approval before purchasing?
4. When does the program year reset?

What Happens If a Program Expires Before Installation?

This is the nightmare scenario—and it's more common than you'd think.

Federal Tax Credits

If you sign a contract before expiration: You're generally protected if you have a binding contract dated before the program ends, even if installation happens after.

IRS guidance: The credit typically applies based on when you "place the property in service"—meaning when installation is complete and the system is operational. For the most current rules, check IRS Publication 5695.

State Rebates

Much less forgiving: Most state programs require:

• Application submission before funding runs out
• Installation completion within a specified timeframe (typically 90-180 days)
• Final documentation submitted within 30-60 days of completion

If funds run out after you apply but before installation: You're usually protected if you submitted a complete application before the deadline.

If funds run out before you apply: You're out of luck, even if you already purchased equipment.

Utility Rebates

Varies by program:

• Some utilities honor pre-approvals even if funding expires
• Others operate strictly on a "funds available at time of final inspection" basis
• Read the fine print carefully

How to Know If Funds Are Running Out

State energy offices rarely announce "We're almost out of money!" But there are warning signs:

Red flags to watch for:

1. Processing delays lengthening: If applications that used to take 4 weeks now take 8-10 weeks, demand may be overwhelming supply

2. Program pauses or waitlists: Some states will pause applications when nearing capacity

3. Mid-year program changes: Sudden rule modifications often signal budget concerns

4. Local installer feedback: Contractors working with multiple customers will know if rebate denials are increasing

5. State energy office announcements: Subscribe to your state energy office's email list for updates

Proactive monitoring:

• Check your state energy office website monthly
• Join local homeowner or sustainability groups—they'll sound the alarm
• Set a Google Alert for "[Your State] heat pump rebate"

Strategic Timing: When Should You Actually Buy?

Given all these variables, here's how to time your heat pump purchase strategically.

If Federal Tax Credits Are Your Primary Incentive

You have flexibility. The 2032 deadline gives you breathing room to:

• Get multiple quotes
• Wait for seasonal sales (often in spring or fall)
• Save up for out-of-pocket costs
• Choose the best contractor, not just the fastest

But don't wait too long: Remember, the program could be modified by future legislation, and you want to avoid the December 2032 rush when contractors will be slammed.

If You're Counting on State Rebates

Move quickly but carefully:

1. Apply ASAP: Even if you're still getting quotes, submit your application if your state allows it
2. Choose a rebate-certified contractor: Not all installers are approved for state programs
3. Keep documentation obsessively: Missing paperwork can disqualify you
4. Build in buffer time: Don't cut it close to funding deadlines

Ideal timeline:

• Month 1: Research programs, get quotes, submit applications
• Month 2: Choose contractor, schedule installation
• Month 3: Complete installation, submit final documentation
• Month 4-5: Receive rebate payment

If Utility Rebates Are Available

Timing depends on utility budget cycle:

Best practice:

• Apply in Q1 (January-March) when annual budgets reset
• Avoid Q4 (October-December) when funds often run low
• Always call to verify current funding before signing contracts

The "Stack Your Incentives" Strategy

Most valuable approach: Combine multiple programs for maximum savings.

Example scenario:

• Federal 25C credit: $2,000
• State HOMES rebate: $8,000
• Utility rebate: $1,500
• Total savings: $11,500

Critical timing consideration: You need all programs to be active and funded when you complete installation. If one expires or runs out, you lose that portion of savings.

Risk mitigation:

• Apply to state programs first (they're most likely to run out)
• Confirm utility funding availability
• Federal credit is your backup (most reliable timeline)

What If You Miss a Deadline?

Don't panic. You have options:

1. Check for new funding:

• States sometimes receive additional allocations
• New federal programs may be authorized
• Local governments may offer supplemental incentives

2. Explore alternative programs:

• Manufacturer rebates (typically $200-$500)
• Financing incentives (0% APR offers can save thousands)
• Property tax exemptions (available in some states)

3. Consider the long-term savings: Even without rebates, heat pumps deliver significant value. According to the Department of Energy, heat pumps can reduce electricity use for heating by approximately 50% compared to electric resistance heating. The rebates accelerate your return on investment, but the fundamental economics of heat pump efficiency remain compelling even without incentives.

Your Action Plan: Don't Leave Money on the Table

Here's your step-by-step timeline to maximize available incentives:

Today:

1. Check your state energy office website for current program status
2. Call your utility company to ask about available rebates
3. Verify federal tax credit details at IRS.gov

This week:

1. Get 3-5 quotes from rebate-certified contractors
2. Ask each contractor about their experience with rebate applications
3. Confirm which incentives you qualify for based on income and equipment specifications

This month:

1. Submit state rebate applications (even if you haven't chosen a contractor yet, if allowed)
2. Apply for utility pre-approval if required
3. Choose your contractor and schedule installation

Within 90 days:

1. Complete installation
2. Submit all final documentation immediately
3. Keep copies of everything for your tax return

Next tax season:

1. File IRS Form 5695 to claim your federal tax credit
2. Keep receipts for at least 7 years (IRS audit window)

The Bottom Line: Timing Is Everything

Do heat pump rebates expire? Yes—but the timeline varies dramatically by program type:

• Federal tax credits: Currently scheduled through 2032 under the Inflation Reduction Act, but subject to legislative changes
• State rebates: First-come, first-served until funding depletes (could be months or years)
• Utility incentives: Annual budgets that often run out mid-year

The safest approach: Don't wait for "someday." If you're serious about upgrading to a heat pump, start the process now while multiple incentive programs are active and funded.

The homeowners who maximize their rebates aren't necessarily the ones who rush to buy—they're the ones who plan strategically, apply early, and stay informed about program status.

Ready to see exactly how much you could save with current incentives? Our Heat Pump Savings Calculator provides personalized estimates based on your location, home size, and income level—helping you understand which programs to prioritize before they run out.

Because the best time to upgrade to a heat pump was yesterday. The second-best time is today—while the rebates are still available.