Selling heat pumps after the 25C tax credit ended: the new pitch, fuel by fuel

For three years, selling heat pumps had a built-in closer: 30% back, up to $2,000, on the customer's next tax return. That's gone. Public Law 119-21, signed July 4, 2025, ended the 25C tax credit for property placed in service after December 31, 2025¹². Any heat pump installed in 2026 gets nothing from 25C.

Plenty of salespeople leaned on that credit so hard that the pitch fell apart without it. The good news: the heat pump case never rested on the credit for most customers. It rests on what they heat with today, what their electricity costs, and whether their AC needs replacing anyway. This post rebuilds the heat pump pitch on those three things, with operating-cost math from Energy Information Administration prices, and an honest map of the incentives that are left.

What changed, and when

1. 2023 to 2025

   25C at full strength

   30% of qualified costs, up to $2,000 a year for qualified heat pumps, separate from a $1,200 limit for other improvements.

2. July 4, 2025

   Public Law 119-21 signed

   Ends 25C for property placed in service after December 31, 2025, and 25D for expenditures made after that date.

3. August 21, 2025

   IRS publishes FAQs

   Confirms the end dates and explains when an expenditure counts as made.

4. December 31, 2025

   Last day for 25C

   A heat pump had to be placed in service by this date to qualify.

5. February 25, 2026

   House passes H.R. 4758

   Would repeal the federal heat pump rebate program (HEEHR). Not law as of this writing.

6. May 29, 2026

   DOE updates rebate guidance

   Rebates may no longer pay to replace gas or other fossil-fuel appliances; states had to comply by September 1, 2026.

The IRS put it in one sentence: the credit will not be allowed for any property placed in service after December 31, 2025². The companion 25D credit for things like geothermal heat pumps ended for expenditures made after the same date. Two related credits for builders ended mid-2026: 45L for new homes acquired after June 30, 2026, and the 179D deduction for commercial buildings whose construction begins after that date².

What incentives are left

The federal Home Energy Rebates created by the Inflation Reduction Act weren't rescinded by Public Law 119-21. The law's rescission section names other IRA programs but not the HOMES (section 50121) or HEEHR (section 50122) funds¹. On paper, HEEHR still allows up to $8,000 toward a heat pump for households under 150% of area median income³.

In practice, three things limit it:

• Only some states have launched. DOE says the rebates are available in select states. A trade association count found twelve states and DC had launched programs as of June 2026⁴.
• No more fossil-fuel replacements. Under DOE's guidance of May 29, 2026, rebates may no longer pay to replace gas or other fossil-fuel appliances⁵. That removes the biggest heat pump use case from the federal program: converting a gas, oil or propane home.
• Money runs out. California's HEEHR single-family rebates were fully reserved statewide as of February 24, 2026, with new projects going to a waitlist⁶.

The House also passed a bill in February 2026 to repeal HEEHR entirely⁷. As of this writing it hasn't become law. Check before you promise anything.

State and utility programs matter more now. They vary enormously, so here are three real examples, not a national rule:

Sources: Mass Save, TECH Clean California and Efficiency Maine program pages, checked September 2026⁸⁶⁹.

Notice the pattern: the richest remaining programs target homes that heat with oil, propane or electric resistance, not gas. That's also where the operating-cost math is strongest. For anywhere else, DSIRE (the Database of State Incentives for Renewables and Efficiency) and your local utility's rebate page are the places to look.

The math that replaces the credit

Without a credit, the homeowner's question becomes simpler and harder at once: "Will this cost me less to run?" Answer it with a number, not an adjective.

Every fuel can be converted to the same unit: dollars per million Btu of heat actually delivered into the house.

Using EIA's 2025 national average residential prices and its standard energy content figures (3,412 Btu per kWh, about 1,036,000 Btu per thousand cubic feet of gas, 91,452 Btu per gallon of propane and 138,500 per gallon of heating oil)¹⁰:

Prices: EIA 2025 annual average residential electricity and natural gas; heating oil and propane are our simple averages of EIA weekly residential prices, October 2025 to March 2026. 60 million Btu is an example heating load, not a typical home. Efficiencies are assumptions.¹¹¹²¹³

The break-even number every tech should know

Flip the math around and you get one number per fuel: the seasonal COP a heat pump needs to match it.

At 2025 national averages:

• vs electric resistance: 1.0. Any working heat pump wins.
• vs an 85% oil furnace: about 1.5.
• vs a 95% propane furnace: about 1.7.
• vs an 80% gas furnace: about 2.7.
• vs a 95% gas furnace: about 3.3.

That list is the new pitch. Against oil, propane and resistance heat, even a cold-climate heat pump running at modest efficiency wins on operating cost. ENERGY STAR's cold-climate criteria, for instance, require a COP of at least 1.75 at 5°F, at or above the propane break-even, even on the coldest days the test covers¹⁴. Against a modern gas furnace at national average prices, a heat pump roughly ties or loses on heating cost alone.

Local rates swing this a lot. Electricity averaged 18.34¢ per kWh nationally in June 2026, up from 17.47¢ a year earlier¹¹. If your area pays 30¢ for power and $20 per thousand cubic feet for gas, the break-even against a 95% furnace climbs above 4. If power costs 12¢ and gas $12, it drops below 3. Run it with your customer's own bills. That takes five minutes and beats any brochure.

Converting a customer's bills in five minutes

A worked example, with assumptions labelled. Say a home burned 800 gallons of propane last winter at $2.55 a gallon: $2,040. At 91,452 Btu per gallon and a 95% furnace, that's about 69.5 million Btu of heat delivered into the house.

A heat pump averaging a seasonal COP of 2.5 delivers that same heat for about $20.28 per million Btu at 17.30¢ per kWh, or roughly $1,410 a year. That's about $630 a year less to heat the home.

Now change one input. If this customer pays 22¢ per kWh instead, the heat pump's cost rises to about $1,790 and the savings shrink to about $250. Same house, same equipment, very different pitch.

That's why the calculation has to use the customer's bills and their utility's rate, not a national number and not a manufacturer's brochure. A tech who can do this on the phone in the kitchen, with the customer watching, has a pitch no tax credit could match. A tech who says "you'll save a lot" has nothing once the credit is gone.

Rewriting the pitch by fuel

1. 1

   Oil, propane or electric resistance

   Lead with operating cost. Show the customer their own fuel bills converted to cost per million Btu next to the heat pump. Check state and utility programs, which favor exactly these homes. Specify cold-climate equipment where winters demand it.

2. 2

   Gas heat with an AC that needs replacing

   Don't sell a heat pump as a furnace replacement. Sell it as a better AC: the price difference between a new AC and a heat pump of the same size buys a second heat source. Many owners pair it with the existing furnace as dual fuel, so the furnace covers the coldest hours.

3. 3

   Gas heat with a working AC

   Be honest that the heating savings are small or negative at average prices. If the customer cares about comfort, emissions or a single system, those are real reasons. Don't invent dollar savings to cover the gap.

4. 4

   All-electric home replacing an old heat pump

   Efficiency is the story: compare the old unit's ratings with the new one's HSPF2 and SEER2. Under DOE's 2026 guidance, electric-to-electric replacements may still qualify for state Home Energy Rebates where programs are open.

The second row is the biggest opportunity for most shops in gas territory, and it never depended on 25C. A customer replacing a 14-year-old AC is going to spend most of the money anyway. The decision in front of them is the increment, and that's an easy conversation to have with a good, better, best layout: AC on one card, heat pump on the next, dual fuel on the third. Our post on good, better, best estimates covers how to build those cards.

The market didn't wait for the credit

It's tempting to assume heat pump sales collapsed with the credit. AHRI's shipment data says otherwise. In 2025, heat pump shipments fell 11.6% to about 3.64 million while gas furnace shipments rose 4.1%¹⁵, a rough year blamed by trade press on the refrigerant transition, tariffs and rates as much as anything. Through July 2026, after 25C ended, heat pump shipments were up 5.8% year to date while gas furnaces were down 5.1%¹⁶.

Shipments aren't sales to homeowners, and seven months isn't a trend. But it's a useful counter to the idea that the product only sold because of a tax break.

What to say at the kitchen table

In TradesWork, an estimate option can show rebates as an after-rebate price, with an end date on each rebate so expired programs drop off, and an estimated yearly energy savings figure labelled as an estimate. Those fields are only as good as what you put in them, so keep the rebate list current and base savings on the customer's own rates.

A heat pump sales checklist for 2026

For pricing the install itself, see how to price HVAC jobs. For the refrigerant side of a 2026 heat pump quote, see A2L replacement pricing, and for presenting a monthly payment alongside, see showing monthly payments honestly. The HSPF2 and SEER2 glossary entries are handy for training.

The credit made heat pumps easy to sell to everyone. Without it, they're easy to sell to the right customers, and honest about the rest. That's a better business anyway.