If you have been researching heat pump installations and came across mentions of a federal tax credit worth up to $2,000, here is what you need to know: that credit expired on December 31, 2025. It is no longer available for new installations.

This is a real change that affects the incentive picture for 2026. But there is still meaningful money available for Kelso and Longview homeowners through Washington State and local utility programs. This post covers what changed, what is still available, and how to think about the current incentive landscape.

What Was the Federal Tax Credit?

The Section 25C Energy Efficient Home Improvement tax credit was part of the 2022 Inflation Reduction Act. It allowed homeowners to claim up to 30 percent of the cost of a qualifying heat pump installation, capped at $2,000 per year.

For a $10,000 heat pump installation, that meant up to $2,000 back when filing federal taxes.

The credit expired December 31, 2025. No federal legislation has reinstated or replaced it. Installations completed on or after January 1, 2026 do not qualify.

If You Installed a Heat Pump in 2025

You can still claim the credit. It applies to equipment placed in service during the 2025 tax year. File IRS Form 5695 with your 2025 federal tax return. You will need the Qualified Manufacturer Identification Number (QMID) from the manufacturer of your heat pump — your installer should have provided this documentation.

The credit is non-refundable, meaning it reduces your federal tax liability dollar-for-dollar but does not generate a refund if your credit exceeds what you owe. Any unused portion cannot be carried forward to future tax years.

What Is Still Available in 2026

The good news is that Washington State programs were not affected by the federal credit’s expiration. The following incentives remain active for Cowlitz County homeowners:

Cowlitz PUD Rebates

Cowlitz PUD offers rebates on qualifying heat pump equipment installed by licensed contractors:

  • Ductless mini-split heat pumps: $900
  • Ducted whole-home heat pump systems: $1,200 to $1,500 depending on equipment type (replacing electric furnace)
  • Heat pump water heaters: $700 to $900 depending on size and efficiency tier

These rebates are paid after installation and apply to any qualifying household — no income limit.

Washington State HEAR Program

The Home Electrification and Appliance Rebates program, funded separately through state-level IRA allocations, remains active. Unlike the expired 25C credit, this is a rebate (cash back), not a tax credit, and it targets lower- and moderate-income households with substantially larger amounts:

  • Households at or below 80 percent of Area Median Income: up to $8,000
  • Households between 80 and 150 percent of AMI: up to $4,000

These can be stacked with Cowlitz PUD rebates. A qualifying household could receive up to $8,800 in combined rebates.

To find the program administrator serving Cowlitz County, email [email protected].

Income-Qualified Weatherization Programs

For households at or below 125 percent of the federal poverty level, the Washington State Weatherization Program and LIHEAP (Low-Income Home Energy Assistance Program) can cover the full cost of heat pump installation and related upgrades at no charge. Contact your local Community Action Agency for eligibility.

How This Changes the Math

Before 2026, a homeowner who did not qualify for HEAR might have looked at this incentive picture:

  • Cowlitz PUD rebate: $900
  • Federal 25C tax credit: $2,000
  • Total reduction: $2,900

In 2026, for that same household, the total is $900 — the federal credit is gone.

For income-qualifying households, the HEAR program more than compensates. But for middle- and higher-income households who do not qualify for HEAR, the incentive picture is meaningfully less generous than it was in 2025.

This is worth knowing when planning a project. It also means that homeowners who have been putting off a heat pump installation lost access to a material incentive at the end of last year.

Will the Federal Credit Come Back?

As of March 2026, no legislation is in place to reinstate the 25C credit. It is possible that Congress could act, but nothing has passed. Planning your project around an incentive that does not currently exist is not a good strategy.

What does exist is the HEAR program, Cowlitz PUD rebates, and the long-term operating cost advantage of a heat pump over a gas furnace in Western Washington’s electricity rate environment. Those factors still make a strong case for heat pump installations in this area — just not as strong as they were in 2025 for households above the HEAR income threshold.

A Practical Note

If you are in the income range where HEAR applies, the current incentive situation is actually better than the 25C credit was for many people — $4,000 to $8,000 in cash rebates beats a $2,000 non-refundable tax credit, particularly if your federal tax liability is modest.

If you are above the HEAR income threshold, the $900 Cowlitz PUD rebate is what you have to work with. On a $6,000 to $10,000 installation, that is helpful but not transformative. The operating cost savings and long-term value of the equipment are the main financial argument.

If you want to understand what the total cost and payback looks like for your specific situation, give me a call. I can run through the numbers with you before you commit to anything.