When the air conditioner stops on a 100°F Sacramento afternoon, the first question is how fast it can be replaced. The second is what to replace it with. A heat pump takes over the furnace’s job as well as the air conditioner’s, so the two quotes are not like for like, and most of the incentives that used to tip the balance have gone. This post sets out what has changed, what is left, and how to decide quickly without regretting it in January.
Tule Sacramento Heat Pump installs ducted heat pumps across the Sacramento region, including replacing an air conditioner with a heat pump, with the work carried out by licensed and insured contractors.
What has changed for heat pump incentives
The federal tax credit ended
The IRS Energy Efficient Home Improvement Credit, known as 25C, paid 30% of the cost of a qualifying heat pump, up to $2,000 a year. It applied to property placed in service from January 1, 2023 through December 31, 2025. A system installed now does not qualify, and the separate residential clean energy credit (25D) has never covered air-source heat pumps.
TECH Clean California closed
TECH Clean California, the statewide program that paid heat pump incentives through enrolled contractors in investor-owned utility territory, announced that November 14, 2025 was the last day to make sales and reserve incentives. It is closed to new reservations.
HEEHRA is fully reserved
The federal Home Electrification and Appliance Rebates, run in California by the Energy Commission as HEEHRA, offered up to $8,000 toward a heat pump for income-qualified households. Single-family funds were fully reserved statewide by February 24, 2026, and the CEC reports Phase I fully reserved by August 31, 2026. Phase II will be announced at a later date. The CEC also warns about scams that use the IRA rebate name. The whole-home HOMES rebate has not launched.
SMUD’s rebate is still open
For SMUD customers, the Heat Pump HVAC rebate remains, subject to funding availability. SMUD lists $3,000 for a variable-stage system replacing gas heat, $2,000 for a two-stage system of at least 15.2 SEER2 replacing gas heat, and $1,000 for an electric-to-electric upgrade. Single-stage systems are not eligible. It requires qualifying equipment installed by a participating contractor in the SMUD Contractor Network, permits and a passing Title 24 verification.
Roseville Electric lists no residential heat pump HVAC rebate, and no PG&E single-family heat pump HVAC rebate was found once TECH and HEEHRA closed. The California heat pump rebates guide and the SMUD rebate guide go through the details.
What that means for the choice
The heat pump case now rests on the house, not the tax credit
With the federal credit gone and the state programs closed, the decision comes down to running costs, the age of the furnace and the utility. A heat pump is an air conditioner that also heats, so it cools a 104°F afternoon the same way a new AC would; the hot weather guide explains how the capacity holds up.
SMUD territory
In SMUD territory, winter electricity is cheap relative to PG&E gas. Derived from published rates, a heat pump needs a coefficient of performance of only about 1.4 at SMUD’s winter off-peak price, or about 2 at the 5 to 8 p.m. peak, to heat for less than a 95% efficient gas furnace. That is a low bar for modern equipment. Add the SMUD rebate on a gas-to-electric switch, and the heat pump often comes out ahead when the furnace is also old.
PG&E territory
In PG&E electric territory, which includes West Sacramento, Davis, Rocklin and El Dorado Hills, the break-even is about 3.1 on the E-ELEC winter off-peak rate. The cooling side carries more of the case there, and heating savings are smaller. The heat pump vs gas furnace guide shows the numbers by utility.
When a new AC still makes sense
- The furnace is young and in good shape, and the plan is to keep it for years.
- The panel has no room for more load and an upgrade is not in the budget right now.
- The ducts are too small for heat pump airflow and the fix has to wait.
Even then, a dual fuel heat pump keeps the furnace for the coldest hours while the heat pump does the cooling and most of the heating. SMUD rebate eligibility for a dual fuel system is confirmed per job.
No rule forces the choice
California’s requirement to use heat pumps for space conditioning applies to new construction, and no state rule was found that requires an AC replacement in an existing home to be a heat pump. The City of Sacramento’s electrification strategy states that it does not set mandatory requirements for immediate appliance replacement. The gas furnace rules guide separates what has been adopted from what has not.
Either way, the job needs a permit, duct sealing and an ECC-Rater visit under Title 24. The heat pump vs air conditioner guide compares the two systems side by side, and the cost guide explains what the prices include.