TL;DR
- SDG&E and California offer up to $3,000 combined per heat pump install in 2026
- Stacking SDG&E + TECH Clean California + federal tax credits can hit $7,500+ total savings
- Funds are first-come, first-served and historically run out by Q3
- You must use a participating contractor and approved equipment to qualify
If you’re replacing a furnace or AC in 2026, a heat pump is now cheaper than the alternatives once rebates are factored in. Here’s what’s actually available and how to claim it.
What SDG&E offers in 2026
SDG&E runs three rebate programs that apply to heat pumps:
Energy-Saving Assistance Program (ESAP). Income-qualified households (under 200% of federal poverty line) get a free heat pump install. No out-of-pocket cost. Limited to single-family and 2-4 unit residential. Apply through the SDG&E ESAP portal.
Equipment rebates (general residential). $750–$1,500 per heat pump depending on efficiency rating. Higher rebates for:
- SEER2 ≥ 18 systems
- HSPF2 ≥ 9.5 (heating efficiency)
- All-electric replacement (removing gas furnace)
Whole-home electrification bonus. Additional $500–$1,000 if the heat pump is part of removing all natural gas appliances. Stacks on top of equipment rebate.
What TECH Clean California adds
The state-funded TECH Clean California program runs alongside SDG&E:
- Standard heat pump: $1,000
- Cold-climate heat pump (rare in San Diego): $2,500
- Income-qualified bonus: additional $1,500
- All-electric retrofit bonus: additional $500
TECH stacks with SDG&E. So a typical mid-range heat pump install qualifies for SDG&E ($1,000) + TECH ($1,000) = $2,000 minimum, often $3,000–$3,500 with bonuses.
Federal tax credit (Inflation Reduction Act)
The 25C tax credit for residential energy improvements covers:
- 30% of heat pump cost up to $2,000 per year
- $300 per panel upgrade if needed for the install
- $150 per home energy audit
This is a tax credit, not a rebate — you claim it when filing, not at point of sale. But it stacks freely with SDG&E and TECH.
Real example: total savings stack
Replacing a 15-year-old gas furnace + AC with a 4-ton heat pump in a Carlsbad home:
| Source | Amount |
|---|---|
| SDG&E equipment rebate | $1,250 |
| SDG&E whole-home electrification bonus | $750 |
| TECH Clean California | $1,000 |
| TECH all-electric bonus | $500 |
| Federal 25C tax credit (30% of $14,000 install) | $2,000 max |
| Total savings | $5,500 |
Net install cost: ~$8,500 instead of $14,000.
How to actually claim them
1. Use a participating contractor. Not every HVAC contractor is enrolled in SDG&E’s program or TECH. Ask before you sign. We’re enrolled in both and handle the paperwork.
2. Verify equipment eligibility. AHRI-certified equipment with the right SEER2/HSPF2 ratings. The contractor pulls the AHRI reference number for the rebate filing.
3. Sign the rebate application at install time. SDG&E and TECH applications happen during install, not after. The contractor submits within 30–60 days of completion.
4. Wait 6–12 weeks for the rebate check or bill credit. SDG&E typically applies the rebate as a bill credit. TECH sends a check.
5. File 25C credit on next tax return. Save the install invoice — your tax preparer will need it for IRS Form 5695.
Pitfalls to avoid
Don’t install before checking eligibility. If your equipment isn’t approved, you’ve installed a system that doesn’t qualify for $3,000+ in rebates. Fixing that retroactively isn’t possible.
Don’t pay for the install before rebates are confirmed. Reputable contractors hold rebate paperwork as a delivery requirement. If a contractor wants full payment before the rebate forms are filed, that’s a red flag.
Don’t assume your panel can handle it. Heat pumps draw less than electric resistance heat but more than gas. A 100A service may need upgrade for a 4-ton heat pump. Panel upgrade cost ($2,500–$5,000) eats into rebate savings if not planned.
Don’t wait until summer. Rebate funds for 2026 are budgeted for the full year but historically run out by August or September. Earlier is safer.
When to call us
We pull permits, file rebates, and install the right equipment for your home. No upselling, no funny math — we tell you what the system costs, what it’ll save, and what your net out-of-pocket is after rebates.
Call us at (858) 925-5546 for a heat pump quote in San Diego County. Free estimate, transparent rebate filing, and we don’t charge until the rebate paperwork is submitted on your behalf.