Most would-be home renovators have their eyes on glamorous projects like a kitchen or bathroom remodel.
Another major investment you can make in a mostly invisible part of your home is the heating and cooling system. While it may not make great fodder for an Instagram before-and-after post, money spent on a new heat pump, for example, can make your home a lot more comfortable.
Now is a great time to add or upgrade heat pumps in your home because there’s a ton of federal and local money on the table to help you afford it.
“You’ve got a lot of opportunities to pass the savings onto yourself,” said Katie Davis, VP of engineering and technology for residential HVAC at Trane Technologies.
So how much money can you get off the sticker price of a heat pump system? Here’s your guide to the financial incentives available right now.
How much does a heat pump cost?
Like any major home improvement, there’s a range of costs. On the low end, a heat pump system, including parts and installation, can cost $6,000 to $10,000, according to Davis. A top-of-the-line system can run from $18,000 to $20,000.
The biggest variable, aside from the specifics of your home, is what type of equipment you choose. Higher-efficiency systems (which lead to greater energy bill savings) cost more upfront compared to lower-efficiency systems.
“It’s quite the range depending on what you’re looking for,” Davis said.
Federal tax credits and incentives for heat pumps
The biggest pot of money at the federal level right now for air-source heat pumps is the energy-efficient home improvement credit. Part of the Inflation Reduction Act, this program allows you to claim 30% of the cost, up to $2,000, of a heat pump that meets certain efficiency standards.
The discount is a tax credit, which means you’d have to pay for the system upfront, and then file a form that can reduce your tax burden for that year. You can apply the credit toward the total project cost, including labor.
A separate program, also part of the IRA, is the residential clean energy credit. This tax credit applies only to geothermal heat pumps (not air-source heat pumps) and allows you to get back up to 30% of the project cost, with no upper limit.
The last piece of the IRA that applies to heat pumps is still rolling out. The federal law allocates $8.8 billion to states for Home Energy Rebates, which means states can give out additional discounts for heat pumps. Each state is developing its own guidelines, so keep an eye out for updates from your state.
“It’s just so new, they’re not all out there yet,” Davis said.
New York recently became the first state to roll out its home energy rebates, called the EmPower+ program. That rebate can be up to $8,000, depending on your household income.
How to find state, local and utility incentives for heat pumps
Long before the IRA came on the scene, many states already had their own programs that give out money for home energy improvements. They might be tax credits or direct rebates off the sticker price of a heat pump.
To find out what’s available in your state, check with your utility company or the state government’s website. A quick search for programs in your state might turn up even more discounts you can apply to a heat pump.
“You can put in a really nice system at a lower cost, because of the money that’s available,” Davis said. She notes that Trane’s website also has a tool where you can punch in your ZIP code and see the local, state and federal incentives that apply to any given heat pump.
Is a heat pump worth it?
It all depends on your personal situation.
“A lot of people don’t think about their HVAC,” Davis said. But if you have an older heating system, now is a great time to start thinking about a new heat pump.
The technology itself has progressed a lot in the past decade, which means new units will be highly efficient and can save you a lot of money. “You’re gonna see the difference on your bill, and I think that’s what a lot of homeowners care about,” Davis said.
Plus, a new heat pump can be a big improvement to the comfort of your home: Don’t forget that heat pumps also work as both heating and air-conditioning units.
