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If you are planning to upgrade your HVAC system in New Jersey, choosing a high-efficiency heat pump could be a great decision. These appliances come with modern technology, provide both heating and cooling, and incur reasonable energy bills. This is about performance and comfort. But there is another advantage to these comfort units that is often overlooked. These are the credits and rebates for heat pumps. Multiple utilities and government initiatives support these systems and help homeowners and property managers make installations affordable.
As related authorities make abrupt changes to application criteria and available options for these credits, having the right information is essential. This blog explores up-to-date information, options, and details of federal tax credits for heat pumps in New Jersey.
Crucial 2026 Status Update
The federal Energy Efficiency Home Improvement Credit (25C) that offered up to $2,000 for residential air-source heat pumps expired on December 31, 2025. The units installed in 2026 are no longer eligible for these rebates. The same is true for geothermal ground-source heat pumps. The confusion arises for homeowners because these credits were scheduled till 2032. But they were terminated abruptly on July 4, 2025, when Congress passed the One Big Beautiful Bill Act (P.L. 119-21).
Though these credits expired in 2025, homeowners who installed their units before the termination date can still claim their unused credits by 2026 tax filings using IRS Form 5695.
While federal tax credits are gone, there are still several options you can leverage. New Jersey state and local utility rebates are two fantastic saving options in 2026.
This is the statewide program managed through the New Jersey Clean Energy Program and regional utility companies. The program promotes energy-efficient HVAC upgrades and specifically promotes the electrification of comfort appliances. It offers cash-back rebates and 0% interest financing options. Homeowners can get up to $7,500 for a whole-home energy upgrade. The exact payout, however, depends on the total energy savings (TES) percentage.
This is an energy-saving initiative by Public Service Electric and Gas (PSE&G) backed by the New Jersey Board of Public Utilities (NJBPU). The program offers generous rebates and 0% interest financing options for various heat pump models. The purpose is to promote electric heat pumps over traditional fossil fuel-based models.
Jersey Central Power & Light utility rebates offer financial incentives for Energy Star-certified heat pump models. Homeowners can expect a rebate of $500 to $1,500 depending on the equipment they choose. Generally, it offers $500 to $1,000 for standard or cold-climate air-source heat pumps, $750 for ductless mini-splits, and up to $1,500 for geothermal systems.
Atlantic City Electric (ACE) is a regulated electric utility company that provides power to southern New Jersey. It offers up to $2,000 rebates for high-efficiency, cold-climate heat pump models. The purpose is to reduce upfront costs while promoting home energy upgrades in the state.
New Jersey Natural Gas and Elizabethtown Gas are two natural gas utility companies operating in various regions in New Jersey. They support heat pump adoption through whole-home energy audits, insulation rebates, and financing options to promote usage of electrification or hybrid heating systems.
Federal tax credits for heat pumps remained a popular rebate option in New Jersey in 2025. But this offer is no longer available in 2026. Homeowners should now shift their heat pump equipment selection and upgrade priorities toward state-level and local utilities. While multiple rebate options are available, local customers can still make their installations affordable.
Feel free to reach out to us for expert HVAC services in New Jersey.
