For years, the federal Energy Efficient Home Improvement Credit (Section 25C) and the Residential Clean Energy Credit (Section 25D) helped American homeowners offset the cost of insulation, heat pumps, windows, and solar. If you were counting on those credits — here's the news you need to know.
What happened to the federal credits
Both credits expired on December 31, 2025. They were originally scheduled to run through 2032, but legislation passed in 2025 moved the end date up. Only improvements installed and placed in service by the end of 2025 qualify. As of 2026, there is no direct federal replacement for these credits.
Watch out: if a salesperson promises you a "federal energy tax credit" on a 2026 installation, that's a red flag. Always verify claims against the IRS's official page — and be skeptical of anyone who guarantees savings or approvals.
The good news: California didn't stop
Federal credits were only ever one layer. California's utility and regional programs continue in 2026 — and some have actually increased their rebates specifically because the federal credits ended. What's available depends heavily on where you live:
Sacramento area (SMUD)
SMUD announced increased rebate levels starting in 2026 — up to $3,000 for qualifying gas-to-electric heat pump HVAC conversions and up to $4,000 for gas-to-electric heat pump water heater conversions. Systems must meet efficiency requirements and be installed by a contractor in the SMUD Contractor Network. Full Sacramento guide here.
San Jose & the South Bay (SJCE, BayREN, SVCE)
San Jose Clean Energy offers a standard $2,500 rebate for replacing a gas water heater with a heat pump model ($3,500 for income-qualified households or Environmental Justice Communities), plus add-ons like $500 for attic insulation. BayREN offers regional incentives across the Bay Area. Full San Jose guide here.
San Diego (SDG&E and water agencies)
SDG&E offers product-level rebates (smart thermostats, efficient water heaters, and more), and the regional water agencies offer one of the more generous outdoor programs in the state: $2 per square foot for replacing lawn with approved water-wise landscaping. Full San Diego guide here.
What about the state HEEHRA rebates?
California's HEEHRA program (federally funded electrification rebates administered by the state) proved so popular that single-family rebates were fully reserved statewide by February 2026. New applications go to a waitlist. A second phase of funding exists but hasn't launched yet. Translation: if HEEHRA reopens, the money tends to go fast — being ready matters.
Three rules for navigating rebates in 2026
- Verify before you sign. Rebate programs run out of funding, change amounts, and update eligibility rules — sometimes mid-year. What was true in January may not be true in July.
- Use a participating contractor. Many programs (SMUD is a clear example) only pay rebates when the work is done by a contractor enrolled in their network. DIY or an unenrolled installer can mean zero rebate.
- Never buy on a promised rebate alone. A qualified upgrade should make sense for your home on its own merits — the rebate is the bonus, not the reason.
The simplest way to find out what applies to your home
Every home and every zip code is different. A free, no-obligation home energy assessment by a licensed contractor is the practical way to learn which upgrades fit your house and which programs you may currently qualify for — with current amounts, not last year's headlines.
See What You May Qualify For
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Check My Eligibility →This article is for general informational purposes only and does not constitute financial, tax, or legal advice. Rebate amounts and program details cited are as reported by their respective program administrators as of July 2026 and are subject to funding availability, eligibility requirements, and change or cancellation without notice. No specific savings, program approval, or free equipment is promised or guaranteed. Eligibility is determined by the program administrator and confirmed by a licensed contractor. California Home Energy Center is a private company and is not affiliated with any government agency or utility provider.