Free Heat Pump: Upgrading to a heat pump can feel expensive, but right now federal and state programs are making it possible to install one at little or no cost. Rebates, tax credits, and energy assistance programs can help cover thousands of dollars in upfront costs. If your income falls within certain limits, you may even qualify for a free heat pump.
This guide explains how heat pumps work, what programs pay for them, how much you can save, and how to apply.
What is a Heat Pump and How Does it Work?
A heat pump is an all-in-one heating and cooling system. It looks similar to an air conditioner with an outdoor compressor unit and indoor air handlers.
Heat pumps transfer heat rather than convert fuel to heat like a furnace does.
During winter, heat pumps take heat from the outside air and deliver it inside to warm your home.
In summer, the process reverses to cool your house by transferring indoor heat outside.
This makes a heat pump much more energy efficient. You can save 50% of your electricity by switching to a heat pump if you have an electric furnace or electric baseboard heater.
Modern cold-climate heat pumps can keep working efficiently even when outdoor temperatures fall below zero. They can handle heating, cooling, air filtration, and even humidity control in one system.
To help the country and individuals move away from fossil fuels, the federal government has introduced tax credits and rebates on heat pump purchases. These incentives can help cover the cost of purchasing and installing energy-saving appliances like heat pumps.
Federal Heat Pump Incentives (IRA Rebates & Tax Credits)
The Inflation Reduction Act (IRA) created new rebates and expanded tax credits to help households switch to efficient heating and cooling systems. These incentives can cover a large part of the cost of buying and installing a heat pump.
To make this energy upgrade more affordable, federal, state, and utility programs offer generous rebates and tax credits.
IRA Heat Pump Rebates
The rebate program is income-based. How much you get depends on your household income compared to your state’s median income.
- Low income (below 80% of state median) – Up to 100% of costs covered
- $8,000 for a heat pump system (heating + cooling)
- $1,750 for a heat pump water heater
- $4,000 for an electrical panel upgrade
- $600 for new electrical wiring
- Moderate income (80%–150% of state median) – Up to 50% of costs covered
- Maximum rebates of $4,875 for a heat pump + water heater combo
- Higher income (over 150% of state median) – Not eligible for IRA rebates
These rebates are applied at the point of sale in most states, meaning you don’t need to wait for reimbursement.
Federal Tax Credit for Heat Pumps
On top of rebates, you can claim a 30% federal tax credit for installing a qualifying heat pump.
- Covers 30% of the cost (equipment + installation)
- Maximum credit: $2,000 per year
- Available until 2032
- No income limits, but you must have federal tax liability
Because the tax credit resets each year, homeowners planning multiple upgrades can spread projects over several years to maximize benefits.
Efficiency Requirements
Not all heat pumps qualify. To be eligible for IRA rebates and tax credits, the equipment must meet the highest non-advanced efficiency tier set by the Consortium for Energy Efficiency (CEE).
Total Saving on Heat Pump
Many states like Maine, New York, and others have additional rebate programs that can be combined with the federal incentives. This combination can help cover the upfront cost or even the entire cost of installing a new heat pump system
Home Heating and Cooling (HVAC) Heat Pump:
- 100% rebate (up to $8,000) for low income
- 50% rebate for moderate-income
- 30% tax credit (up to $2,000) for all taxpayer
Hot Water Heat Pump
- 100% rebate (up to $1,750) for low income
- 50% rebate for moderate-income
- 30% tax credit (up to $2,000) for all taxpayer
Electric Panel Upgrade
- 100% rebate (up to $4,000) for low income
- 50% rebate for moderate-income
- 30% tax credit (up to $600) for all taxpayer
Electric Wiring
- 100% rebate (up to $600) for low income
- 50% rebate for moderate-income
State-Specific Heat Pump Rebate Programs
In addition to the federal incentives, many states have their own rebate programs. When you combine state rebates with the IRA rebates and tax credits, the total savings can cover nearly the entire cost of a new heat pump system.
New York (NYSERDA Programs)
The New York State Energy Research and Development Authority (NYSERDA) offers strong heat pump incentives:
- Up to $14,000 in rebates for low- and moderate-income households installing whole-home heat pumps.
- Per-ton rebates for contractors, which often reduce your upfront costs.
- Extra funding through utility companies like Con Edison and National Grid.
Maine (Efficiency Maine)
Maine is one of the national leaders in heat pump adoption. The Efficiency Maine program provides:
- Up to $2,400 in rebates for ductless mini-split heat pumps.
- Low-income households may qualify for free heat pumps through community programs.
- Rebates are stackable with federal tax credits.
California (TECH Clean California)
California has made heat pump adoption a key part of its clean energy strategy. The TECH Clean California program includes:
- Up to $3,000 in rebates for replacing gas furnaces or old AC units with heat pumps.
- Rebates offered directly through contractors at the time of installation.
- Additional incentives in some areas from utilities like PG&E and SoCal Edison.
Many other states (Massachusetts, Vermont, Colorado, Oregon, etc.) also run their own rebate and efficiency programs. Each state has different rules, so it’s worth checking with your state energy office or local utility.
Canadian Heat Pump Programs & Rebates
Canada also has several federal and provincial programs to help homeowners switch to heat pumps, making them more affordable and accessible.
- Ontario – Oil to Heat Pump Affordability Program – Provides up to $10,000 in rebates for low- to median-income households switching from oil heating to an energy-efficient heat pump.
- British Columbia (CleanBC Program) – Offers rebates of up to $6,000 for air-source heat pumps, plus additional top-ups from federal incentives.
- Alberta – Efficiency Alberta has provided rebates for energy-efficient equipment, and homeowners should check for the latest municipal or provincial updates.
- Prince Edward Island (PEI) – Low-income seniors may qualify for free heat pumps through provincial energy-assistance programs.
- Nova Scotia (Efficiency NS) – Rebates for ductless mini-split heat pumps, plus a Heating Assistance Rebate Program that supports seniors with energy costs.
- New Brunswick (NB Power) – Rebates for ductless and central heat pumps, including bonuses for whole-home systems.
- Newfoundland & Labrador (NL Hydro) – Provides rebates for high-efficiency electric heat pumps and mini-split systems.
Since rebates differ by province, homeowners should visit their provincial energy agency websites to confirm eligibility.
International Heat Pump Rebates (Australia Example)
Heat pump incentives aren’t just available in North America. Countries like Australia also provide rebates for switching to energy-efficient systems.
- Victoria (Solar Homes Program) – Homeowners can get rebates for efficient electric hot water systems, including heat pump water heaters.
- Tasmania (Energy Saver Loan Scheme) – Rebates and interest-free loans are available for heat pump hot water systems, helping households reduce energy bills and carbon emissions.
If you live outside the U.S. or Canada, check your local government’s energy efficiency or climate action office for rebates in your area.
How Much Money Do Heat Pumps Save?
Installing a furnace that runs on fossil fuels can cost between $1,500 and $6,500, with an additional $2,500 for installation.
A central air conditioner can cost $2,000, with installation costs ranging from $5,000 to $9,000.
Alternatively, a heat pump can replace both air conditioner and furnace with its dual heating and cooling functions.
When it comes to heat pump installation costs, you can expect to pay between $3,500 and $20,000. The price can vary depending on the size of your home.
After rebates, the average American homeowner pays around $14,000.
Heat pumps are a more efficient option than furnaces, resulting in long-term savings on utility bills.
By switching to a heat pump, homeowners can expect to save anywhere from $100 to $1,300 per year on heating and cooling costs, with an average savings of $667 per year.
Switching from oil or propane furnaces to a heat pump can save even more on annual energy bills.
Heat pumps are efficient systems that can regulate your home’s temperature, heat your water, and even dry your clothes more efficiently than other technologies
Modern Heat pumps can also run on renewable energy like solar, which could result in even greater reductions in climate-harming pollution.
Heat pumps also provide year-round benefits like air conditioning, dehumidification, and air filtration. Modern cold-climate heat pump models work efficiently even when temperatures drop below freezing.
How to Qualify for Free Heat Pumps Through Assistance Programs
To receive the full rebates and free heat pump system, you must meet certain income and eligibility guidelines. Here are some of the main assistance programs available:
- Federal Low Income Home Energy Assistance Program (LIHEAP) – LIHEAP provides federally funded energy assistance grants to low income households. If you qualify for LIHEAP aid, you can get up to $8,000 in heat pump rebates through the Inflation Reduction Act.
- State Weatherization Assistance Program – This program helps low-income families reduce energy bills through energy efficiency upgrades. Receiving weatherization assistance can qualify you for state heat pump rebates that can cover upgrades such as insulation, air sealing, and heat pump installation.
- State Heat Pump Initiatives – Many states like New York and Maine have heat pump initiatives that offer rebates and incentives on top of the federal ones. Check your local utilities and energy agencies.
- Non-Profit Organizations – Some non-profits, like community action agencies work with state and federal programs to provide energy assistance and weatherization services. They can help you access heat pump rebates.
- Utility Company Rebates – Even if you don’t qualify for low income programs, some utility companies offer their own heat pump rebates that can add to the savings.
How to Apply for Free Heat Pump Programs
Here are the main steps to take advantage of the rebates and get a free heat pump system installed in your home:
- Determine if you meet the income requirements – Income limits vary by program but are generally below 80% of area median income for the full 100% rebates.
- Find a participating contractor – Many rebate programs require you to select from approved contractors who will handle the rebate paperwork.
- Apply for assistance – Contact your local LIHEAP or weatherization office to submit an application. Non-profit agencies can also assist with the process.
- Get a home energy assessment – Most programs will do an inspection to ensure your home is suitable for a heat pump system.
- Install the heat pump – Once approved, your contractor will schedule the installation which is covered by the rebates.
- Maintain eligibility – You may need to provide income verification each year you receive heating bill assistance
Conclusion
Now it is a great time to upgrade your home heating and cooling system to an efficient heat pump. You can take advantage of rebates and tax credits that can help you make this upgrade without having to pay much or anything at all. This will help you save on energy costs while enjoying a more efficient system.
Frequently Asked Questions
A heat pump can absolutely work in cold climates. Today’s cold-climate heat pumps can heat a home efficiently even when the temperature drops below -10 degrees Fahrenheit.
If your household earns less than 80% of the median income in your state, you can get 100% of the available rebates. Spend $10,000 on a heat pump and heat pump water heater, and get $9,750 back based on your state’s rebate program. Almost free.
Rebate programs could be implemented through utility companies or state-run agencies. You can claim the tax credits on your federal income tax returns by using the IRS Form 5695.
Yes. In the U.S., the federal government offers rebates up to $8,000 and tax credits up to $2,000 under the Inflation Reduction Act. In Canada, grants like the Oil to Heat Pump Affordability Program (Ontario) and CleanBC rebates help reduce costs.
States leading the way include:
New York (up to $14,000 in rebates through NYSERDA)
Maine (free or discounted mini-splits through Efficiency Maine)
California (up to $3,000 through TECH Clean California)
Other states like Massachusetts, Vermont, and Oregon also run strong programs.
Yes. Most state and federal rebates apply to ductless mini-splits, which are ideal for homes without central ductwork. They are often cheaper to install and still qualify for IRA rebates and federal tax credits.
