SMUD's Heat Pump Rebate in 2026: What Qualifies
Updated 2026-10 · Sacramento, CA
The numbers SMUD published
On February 18, 2026, SMUD announced higher residential heat pump rebates, effective that month. It gave two reasons: the federal tax credits for heat pumps expired on December 31, 2025, and state incentive programmes had run out of funding. The published amounts:
- Up to $3,000 for a gas-to-electric heat pump HVAC conversion
- $1,000 for an electric-to-electric heat pump HVAC upgrade
- Up to $4,000 for a gas-to-electric heat pump water heater conversion
The heat pump HVAC rebate is the one that matters for heating and cooling. It applies when a heat pump replaces a gas furnace (and normally the AC with it).
What the system has to be
SMUD's rebate page says the HVAC system must be a qualifying two-stage package system rated at least 15.2 SEER2, or a variable-stage electric heat pump. It must be installed by a participating contractor in the SMUD Contractor Network, which has its own search site. A company outside the network cannot get you the rebate, however good its price. Terms change; confirm them on smud.org and with the contractor before signing.
Who it suits
Furnace and AC both old
The best case. You were going to replace both, a heat pump replaces both, and the rebate comes off a bill that was coming anyway.
Old furnace, young AC
Harder. Replacing a working AC to get the rebate rarely pays. Some owners repair the furnace and plan the heat pump for when the AC goes.
Young furnace, failing AC
A heat pump in place of the AC can work alongside the existing furnace as a dual-fuel system, but the gas-to-electric rebate is written for removing gas heating, so ask the contractor which rebate, if any, applies.
What else the conversion involves
The panel, the ducts and the permit. Many older Sacramento houses have 100-amp electrical panels that may need an upgrade; ducts sized for a furnace may be small for a heat pump; and the job needs a permit with Title 24 energy-code testing. SMUD's time-of-day rates matter too: a heat pump moves your heating onto the electric bill, so learning the 5 to 8 p.m. weekday peak, which is much pricier in summer, keeps running costs down.
The effect on repair or replace
Before 2026 the federal credit did some of this work. With it gone, the SMUD rebate is the main incentive, and it is enough to change the decision on a system where an expensive repair is due on a 15- or 20-year-old furnace and AC pair. Get a repair quote and a heat pump quote side by side.
Want both quotes? Call or send a request and say you want the heat pump option priced, and a local heating and air company will call you back.
Where to go next
Common questions
Does the SMUD rebate cover a ductless mini-split?
Ask SMUD and the contractor. The published HVAC rebate describes qualifying two-stage package and variable-stage heat pump systems; whether a particular ductless system qualifies depends on SMUD's current equipment list.
Who applies for the rebate?
In most cases the SMUD Contractor Network company handles it as part of the job. Confirm that in writing on the quote.
Is there still a federal tax credit?
SMUD's February 2026 announcement says the federal heat pump tax credits expired on December 31, 2025. Check with a tax professional for your own situation.