Before You Buy a Heat Pump in 2026: The $2,000 Federal Credit Is Gone. Against Cheap Gas It May Not Save You a Dime.

A heat pump used to come with a federal tax credit of 30 percent up to $2,000 a year.

For work finished in 2026, that's gone.

The IRS's FAQ from August 21, 2025 says the credit isn't allowed for any property placed in service after December 31, 2025. For geothermal heat pumps, it ends for expenditures after that date, treated as made when installation is complete. So paying a deposit in December doesn't help.

Public Law 119-21, signed July 4, 2025, did it. The statute text now says the credit doesn't apply to property placed in service after December 31, 2025.

On the average quote of $15,393, 30 percent is $4,618. The $2,000 cap would have applied. So about $2,000 of expected help doesn't exist. Our arithmetic.

Here's the mess.

A letter from at least 19 House Ways and Means Democrats, dated September 11, 2025, argues the law amended the wrong subsection. They say the credit remains in effect through 2032. The Office of the Law Revision Counsel's text shows the termination date.

We found no court ruling, IRS reversal or new law in 2026. We're not giving legal advice. The IRS says otherwise, and we'd plan on that.

Government pages even disagree. The IRS credit page still says improvements made through December 31, 2025. ENERGY STAR's heat pump page still says through December 31, 2032, which is stale.

If a salesperson mentions a federal credit for a 2026 install, ask for it in writing.

The Department of Energy's state-run rebates are a separate thing. The statute gives up to $8,000 for a heat pump, $4,000 for a service panel, $2,500 for wiring and $1,750 for a heat pump water heater. It covers 100 percent of cost under 80 percent of area median income and 50 percent from 80 to 150 percent.

But an award to a state isn't an open program. A June 2026 factsheet said only 13 programs, 12 states plus Washington, D.C., had launched. The Department of Energy updated its guidance on June 1, 2026. Trade press reports it bars using the rebates to swap oil or gas heat for a heat pump, and gave launched programs until August 31 to conform. We couldn't get the Department's own page for that.

State money still exists. Efficiency Maine's October 1, 2026 flyer lists lifetime heat pump rebates up to $9,000 for low income and $6,000 for moderate income per housing unit. A $500 whole-home bonus runs through December 31, 2026.

A heat pump doesn't automatically cost less to run.

Here's the cost to deliver one million Btu of heat, at 2025 US average prices unless marked. Our arithmetic:

Read it this way. With cheap gas a COP 2.5 heat pump loses to a 95 percent furnace and roughly ties an 80 percent one. Against propane, oil and electric resistance it wins. In 30-cent electricity states it loses to nearly every fuel except oil at today's price.

For an average home on the calculator above, the numbers run like this:

The picture flips for oil and propane homes. The Energy Information Administration shows heating oil at $6.138 a gallon and propane at $2.638 on October 12, 2026. That's up $2.595 and $0.213 from a year earlier. Our estimate: about $945 a year saved in an oil home and about $364 in a propane home.

The prices that drive this:

• US residential electricity was 18.31 cents per kWh in July 2026, up from 17.45 a year earlier
• The agency forecasts 18.2 cents for 2026 and 18.7 for 2027
• Year-to-date 2026 state prices: Massachusetts 30.14, California 33.25, Michigan 21.53, Texas 16.06 and Louisiana 13.35 cents
• Gas was $15.34 per thousand cubic feet in 2025 and is forecast at $16.09 for 2026

So if your gas furnace works, gas is cheap and you don't need new cooling, the running-cost case is thin. Replace at failure and price a hybrid system then.

A seasonal COP isn't the number on the box. We got 2.5 from an HSPF2 rating of 8.5. Real seasonal COP is lower in very cold regions. A very cold gas home with a COP of 2.2 and a 54 million Btu load costs about $197 more a year on the heat pump. That's our estimate.

The Energy Information Administration's survey says the average home using gas for heat burns 34.4 million Btu a year. It's 54.0 in very cold and cold regions and 32.6 in mixed-humid ones.

EnergySage, a marketplace, published an average quote of $15,393 before incentives on March 19, 2026. It's an average, not a median. Sample size and quote dates aren't stated, and most quotes came from Massachusetts, so the national picture likely skews.

We found no sourced price for a panel upgrade, new ductwork, a condensate pump or a line set. The federal rebate cap for a panel upgrade is $4,000. That's a cap, not a market price.

We also found no sourced price for the furnace and air conditioner you'd avoid buying. Put your own quote in the calculator.

Here's what financing does. $15,393 over 10 years at 11.9 percent is $219.96 a month. That's $26,395 total and $11,002 of interest. Our arithmetic.

The 11.9 percent is the Federal Reserve's August 2026 rate for 24-month bank personal loans, a stand-in. A home-equity line or a utility loan can run cheaper. Credit cards were assessed 22.36 percent.

We found no sourced contractor-loan rates. One competing financing vendor claims dealer fees run 3.9 to 15.75 percent of the job. We couldn't verify that.

The cheapest honest way to buy:

• Check incentives first, in writing. Use the ENERGY STAR Rebate Finder, your state energy office and the federal income-based rebates.
• Get three written quotes on the same scope
• Ask for the cash price separately from any financed price
• If you heat with gas in a long winter, price a hybrid beside an all-electric option

Hybrid keeps the gas furnace as backup. The break-even COP against gas is high, so it matters.

A heat pump sized wrong fails quietly.

ENERGY STAR's installation bid checklist asks: will you measure my home and calculate the right size using Manual J? It says proper equipment size is vital for efficiency and comfort. Manual J is the Air Conditioning Contractors of America's load calculation. The group says it is required by national building codes and most state and local jurisdictions.

The Department of Energy's page says oversizing, improper charging and leaky ducts cause efficiency losses.

Here's ENERGY STAR's number. It says more than half of new systems in US homes don't perform to their rated efficiency because of improper installation. It says improper installation can cut performance by as much as 30 percent. The sheet is undated.

So the quote needs more than a tonnage:

• A written load calculation with room-by-room loads
• Equipment selection tied to that load
• A duct assessment with a measured leak number
• The exact model numbers and an AHRI certificate for the matched indoor and outdoor units
• Measured refrigerant charge and airflow written down

Worry if you hear we size by square footage, one ton per 500 feet or the same as the old unit.

Then the cold. ENERGY STAR Cold Climate certification requires a COP at 5 degrees of at least 1.75. It requires heating capacity at 5 degrees of at least 70 percent of capacity at 47 degrees. NEEP, a regional efficiency group, says simply meeting the minimum listing criteria doesn't mean a product suits every cold-climate job. It tells buyers to review loads and capacities at design temperatures.

So ask for the manufacturer's expanded performance table. Worry if you hear it works down to minus 13 with no capacity number.

Backup strip heat is the part of a heat pump bill nobody mentions.

The brochure shows the best-case COP. Your bill gets the coldest week.

Electric resistance heat turns one kilowatt-hour into 3,412 Btu with no multiplier. At 17.3 cents that's $50.70 per million Btu. That's about 2.5 times the heat pump rate in the table above.

The Department of Energy tells buyers to keep electric resistance heat use to a minimum and to use a heat-pump-specific thermostat. We found no sourced average strip-heat run time.

So ask for the backup in writing:

• How many kilowatts it is
• The outdoor temperature at which it's allowed to run
• Whether the thermostat is heat-pump-specific
• An estimate of a cold week's cost

Worry if you hear it kicks in automatically with no kilowatts, no lockout and no cost.

Three things hide outside the equipment price.

Ducts. ENERGY STAR says in most cases total duct leakage should be no more than 20 percent. It asks whether the contractor will test it and repair damaged ducts. Worry if you hear your ducts look fine with no test.

Electrical. Ask whether the panel can carry the load. Ask the breaker and disconnect size, the wire run and what happens if a service upgrade is needed. The Department of Energy's permit checklist requires an electrical line diagram and a load calculation. Its checklist leaves service upgrades out.

Worry if the quote says might need a panel, we'll see, priced at zero.

Permit and license. The FTC says to consider only contractors who are licensed and insured, and to confirm the license with your state or county. EPA requires Section 608 certified technicians for work that could release refrigerant.

The department's checklist describes a combined mechanical and electrical permit. Worry if you hear no permit is needed.

A cheap quote often leaves these out. Then the bill arrives in change orders. For how projects go over budget, see the home improvement guide.

And the house itself matters. Windows and air sealing change the heating load that Manual J uses. Sizing a heat pump after an envelope upgrade avoids oversizing. See the replacement windows guide.

New heat pumps use a different refrigerant.

EPA's 2023 Technology Transitions rule limited new residential air conditioning and heat pump systems made or imported after January 1, 2025 to refrigerants under a global-warming limit of 700. That points to blends such as R-454B. Installing older systems was to end January 1, 2026.

EPA published its final reconsideration rule on May 26, 2026.

It removed the installation deadline for systems made or imported before January 1, 2025. So a contractor can lawfully install leftover R-410A equipment. New equipment is on the new refrigerant.

The supply side wobbled. EPA found supply chain issues resulting in shortages, price spikes and stockpiling of R-454B in spring and summer 2025.

We found no sourced price for repair parts or service on the new refrigerant. Ask which refrigerant the system uses, who services it and what the parts warranty says.

One more rule of the road. Under the Department of Energy's 2023 standards, a discontinued pre-2023 system that wasn't certified as a matched combination isn't compliant for sale. A used or leftover mix-and-match set can be an illegal sale.

These are public cases. Most are allegations or settlements without findings.

Massachusetts, September 21, 2026. Five utilities sued MWD Heating & Air Conditioning and its owner in Plymouth Superior Court, as reported by The Boston Globe. They allege rebates were collected for heat pumps never installed, installed improperly or installed and then removed. They say nearly $8 million is at issue, with 220 sites inspected. In Brockton a $61,875 rebate application for nine units found five removed two weeks after the install was confirmed. Those are allegations. We found no criminal charge.

The lesson for you: a program-registered contractor can still be a bad one. Check the work yourself.

Pennsylvania. The attorney general sued Curtis Total Service in June 2022. It settled in spring 2026 for $300,000 in restitution and penalties, per ACHR News. The alleged conduct:

• Pushing replacement of repairable systems
• Blank or incomplete contracts
• Changing terms after signing
• Misstating financing and cancellation rights
• Threatening customers who tried to cancel

Florida. The attorney general's July 2022 settlement with Bruno, LLC alleged deceptive air-conditioning sales to seniors, including ignoring Florida's three-day cancellation. Terms included $100,000 to eligible consumers and a permanent ban from the HVAC business in Florida.

GreenSky. On July 12, 2021 the CFPB issued a consent order over loans consumers hadn't authorized. GreenSky neither admitted nor denied the findings. The order says it received at least 6,000 complaints between 2014 and 2019, and the merchant was at fault in at least 1,600 instances. It carried a $2,500,000 civil penalty.

Ygrene. The FTC alleged that Ygrene and its door-to-door contractors misrepresented a property-tax-lien financing program. Ygrene agreed to pay $3 million. In July 2025 the FTC announced more than $2.9 million going to 960 consumers. The liens weren't removed.

Maine. A Waterville couple took a $2,500 Efficiency Maine loan for a heat pump, and it kept shutting off. A second contractor found a factory circuit-board defect. Efficiency Maine removed the model from its eligible list. The first contractor sued the couple in small claims. It was dismissed without prejudice.

Put the heat source warranty, the labor warranty and a plan for a cold-weather failure in writing.

Installed equipment doesn't go back. The protection is the cancel window and the written scope.

The FTC Cooling-Off Rule. A sale made at your home for $25 or more gets three business days to cancel. The seller must give a completed notice and tell you orally. The refund is due within 10 business days. Business days exclude Sundays and federal holidays.

If you asked the seller to visit for repairs, that sale is outside the rule. But anything extra sold on the visit is covered. We couldn't settle whether a replacement-quote visit counts as repairs. Ask for the state notice anyway.

California caps a down payment at the lesser of $1,000 or 10 percent. Massachusetts caps it at the greater of one-third or the cost of special-order material. Both numbers come from secondary summaries, because the state pages errored.

Warranty availability. Under 16 CFR 702.3, a door-to-door seller must say orally that warranty copies are available to inspect before the sale. We found no sourced typical HVAC warranty terms. Ask for parts, compressor and labor separately, and the registration deadline.

The FTC's contract list:

• The contractor's name, address, phone and license number
• Start and finish dates
• Verbal promises in writing
• No blank spaces
• Never the full amount up front
• Final payment only when you're satisfied
• A written statement of the right to cancel

The FTC says never agree to financing through the contractor without shopping around. Ask for the APR, any dealer fee built into the price, the lender's name and whether a lien is recorded. Worry if only a monthly payment is quoted or the zero-percent price is higher than the cash price.

See the solar panel guide for the same financing and lien traps.

Six rules. Each one comes from the cases above.

We read the IRS, the Department of Energy and ENERGY STAR. We read EPA, the Energy Information Administration and the Federal Reserve. We also read the FTC and the CFPB. We checked them on October 20, 2026. Marketplace, trade-press and news sources are marked as secondary where we use them.

Nothing here is tax, legal or financial advice.

The pages we used:

• The IRS on the home improvement credit
• The IRS FAQ on Public Law 119-21
• 26 U.S.C. 25C
• ENERGY STAR's heat pump criteria
• ENERGY STAR's installation bid checklist
• NEEP's cold climate specification
• The Department of Energy on purchasing heat pumps
• The Department of Energy's 2023 standards FAQ
• The Department of Energy's permitting checklist
• ACCA on Manual J
• EPA's technology transitions fact sheet
• The Energy Information Administration's electricity prices
• The Energy Information Administration's gas prices
• The Energy Information Administration's heating oil and propane update
• EnergySage's heat pump cost guide
• Efficiency Maine's rebates flyer
• The statute on home energy rebates
• The FTC on avoiding a home improvement scam
• The FTC Cooling-Off Rule, 16 CFR 429.0
• The CFPB's GreenSky consent order
• The FTC on Ygrene
• The Federal Reserve's consumer credit release

What we couldn't confirm:

• A court or IRS resolution of the dispute over the credit
• The Department of Energy's own page on the June 2026 rebate guidance
• Sourced prices for panel upgrades, ductwork, repairs and used equipment
• Typical HVAC warranty terms
• Noise levels in decibels
• Tariff effects on equipment prices
• Whether EPA's May 2026 rule is in effect and on what date
• The dealer-fee range for contractor financing

This guide is part of our series on what people research before they buy.