The Gas-to-Heat-Pump Rebate Is Gone. The Electric-to-Heat-Pump One Isn't.

If you have been planning to replace a gas furnace with a heat pump and use the federal electrification rebate to help pay for it, that plan no longer works. The Department of Energy removed fuel switching from the program in Program Notice 26-2, issued on 29 May 2026.

But a lot of the coverage of this has been too broad, and if you take away "heat pump rebates are gone" you will leave money on the table. The change is narrower than that, and the households it hurts least are the ones with the worst heating bills in the country.

What the notice actually says#

The operative sentence is worth reading in full, because the second half of it is the part that gets dropped:

Removing program allowances for upgrades for fuel-switching (i.e. replacement of non-electric appliances) and instead allowing rebates for upgrading HVAC and appliances only from existing electric equipment to more efficient electric equipment.

So the program did not stop paying for heat pumps. It stopped paying for conversions. The test is no longer "what are you installing" but "what are you replacing."

There are narrow exceptions: new construction, and heat pumps installed in a system that keeps a fossil-fuel appliance as backup.

Who is unaffected — and it's a big group#

If your home is heated by electric resistance — baseboard heaters, wall units, or a furnace with heating elements rather than a burner — you are still eligible, and you are also the household with the most to gain.

Electric resistance heat converts electricity to heat at roughly one to one. A heat pump moves heat rather than making it, and typically delivers two to three times as much warmth per unit of electricity. Swapping one for the other is usually the single largest cut to a heating bill available to any American household, and it remains an eligible upgrade under the tightened rules.

This matters more than it might sound. Electric resistance heat is concentrated in older rural housing, in manufactured homes, and across large parts of the South where "electric heat" was the cheap option when the house was built. Those are, on average, not wealthy households, and they were never the ones the fuel-switching debate was about.

Also unaffected:

• Air conditioner replacement. Swapping an old central AC for a modern heat pump is an electric-to-electric upgrade — the two machines are nearly the same thing, one of which can also run backwards.
• Heat pump water heaters replacing electric resistance tanks.
• The whole-home efficiency track, which is a separate program paying on energy savings across the house rather than on appliance type. Insulation, air sealing and duct work are untouched — and in several states that track is open while the electrification one is not.

Who is affected#

If you currently heat with gas, propane or oil, the electrification rebate is no longer available for the conversion. That is the whole change, and it is a real loss for households in cold states where the up-front cost was the main obstacle.

Your remaining options are your utility's own rebates, which run on separate budgets and rules and are unaffected by any of this, and the whole-home efficiency track if your state has it open.

The timing is not the same everywhere#

DOE required launched programs to comply within three months of publication. States are landing at different points inside that window, and a few have moved early:

• Georgia stopped accepting fuel-switching projects on 10 August 2026 — and then paused its entire electrification track at 1pm on 14 August, with essentially no notice.
• Arizona urged applicants to file by 1 August 2026 to be assessed under the previous guidelines.
• Maryland is reviewing the notice before launching its program at all.

Most states never opened an electrification program in the first place, so for them this is a rule change to a thing that does not exist yet. We track which states can actually take an application today — at the last check it was 13 out of 49 that we have verified. If you want the answer for your own project rather than your state in general, the eligibility checker walks the same rules in three questions.

What to do if your project is underway#

If you have an approved reservation, you are probably fine. The change applies to new reservations, and states that have acted have said already-submitted applications will still be reviewed. But funding is finite and "subject to available funding" is doing real work in those sentences. Contact your state program directly and get your specific reservation confirmed. Do not rely on your contractor's reading of it.

If you have a signed contract but no reservation, this is urgent. Find out today whether your state has implemented the change and whether your project was reserved before the cutoff. A contract signed on the assumption of a rebate that no longer exists is a conversation to have with your installer now, not after the equipment arrives.

If you are still getting quotes, take the rebate out of your spreadsheet and see whether the project still makes sense. Which brings us to the part that matters more than any of this.

The rebate was never the main number#

Here is the thing worth internalising: for a heating system you will own for fifteen to twenty-five years, the running cost dominates the purchase price. A rebate is a one-time discount. The electricity-to-gas price ratio in your state applies every winter for the life of the machine.

In roughly half of US states, a heat pump already costs less to run than a gas furnace on the raw energy prices — no rebate required. In a handful, notably Alaska, Michigan, Connecticut and Wisconsin, gas is meaningfully cheaper to run and the rebate was genuinely propping up the decision. In those states, losing it should change your answer. In the others, it mostly shouldn't.

You can check your own state's ratio, its four-year price trend, and what both imply for running cost on your state's page, or put your own numbers into the heat pump running-cost calculator. The trend is the part people skip and shouldn't: a state where electricity is currently cheap but rising nine per cent a year is a different investment from one where it is flat. If your winters are severe, the other question worth settling is whether a cold-climate model holds its capacity when you need it.

And a reminder about the tax credits#

Separately from all of this, the two federal tax credits homeowners used for this work have ended. The Energy Efficient Home Improvement Credit (25C) is not allowed for property placed in service after 31 December 2025, and the Residential Clean Energy Credit (25D) is not allowed for expenditures made after the same date.

The trap in 25D is that the date tests installation, not payment. Paying in full in 2025 for a system installed in 2026 does not qualify. We keep the exact IRS wording on the incentive tracker.

The short version#

The headline "heat pump rebates are over" is wrong, and believing it will cost some households real money. What ended is using the electrification rebate to move off gas. What continues is using it to replace electric equipment with better electric equipment — which happens to be the upgrade with the biggest bill impact available, in the homes that need it most.

Check what you are replacing, not what you are installing. Then check your state, because the dates differ and a fair number of state programs cannot take your application at all.