Life After 25C: How to Stack PSEG and NYSERDA Heat Pump Rebates in 2026

The federal tax credit everyone got used to is gone, and a lot of homeowners haven't caught up yet

The Section 25C Energy Efficient Home Improvement Credit, that handy federal tax credit that gave homeowners up to $2,000 back on a qualifying heat pump installation, expired on December 31, 2025. We're now five months past that deadline and we still have homeowners calling us assuming the credit is in play. It isn't. If you installed a heat pump system in 2025, you can still claim the credit on the return you file this spring. Anything installed in 2026 doesn't qualify, even though the credit was originally scheduled to run through 2032 before it was pulled forward.

The reflex from a lot of people has been to assume the math on a heat pump installation no longer works without the federal tax credit. It does. PSEG Long Island and NYSERDA both expanded their rebate programs for 2026, and stacked correctly, the local incentives more than fill the hole the federal credit left. For most Suffolk County homes converting from oil heat or propane, the after-rebate cost in 2026 is actually lower than it was in 2025 with the federal credit included.

Here's how the new heat pump rebate stack works on Long Island and how to keep more of your money on the table.

What changed and what didn't

A few things shifted at the start of the year. The federal 25C tax credit ended. PSEG Long Island moved to a new rebate schedule with higher payouts for whole-home heat pump installations. NYSERDA's Clean Heat program kept its per-ton structure but added more flexibility on equipment eligibility, with ENERGY STAR certified cold climate air source heat pump models getting the top-tier incentives. Rate Code 580, the heating-season delivery charge discount, did not change and is still one of the most underrated pieces of the picture.

The 25D residential clean energy credit, which covers ground source heat pumps and a few other technologies, is still in place. So if you're looking at a geothermal heat pump system, you've still got a federal tax credit lever to pull. Air source heat pumps, which is what most homes on Long Island install, no longer qualify for any federal credit on their own.

The 2026 PSEG rebate, in actual dollars

PSEG Long Island's residential heat pump rebate is the heaviest single piece of the stack. PSEG Long Island offers rebates on air source heat pump installations and ground source heat pump installations, scaled by system tonnage and the fuel source you're replacing. For 2026, payouts on a typical whole-home air source heat pump conversion run roughly:

A 2-ton system on an existing home, usually $4,000 to $5,500. A 3-ton system, the most common size we install in a Patchogue or Sayville cape, $6,000 to $7,500. A 4 to 5-ton system on a larger home, $8,000 to $10,500. Homes converting away from oil or propane heat tend to land at the top of each range. Gas conversions and new construction installations still qualify, just at slightly different rebate tiers.

To qualify, the equipment has to meet PSEG's efficiency thresholds (typically ENERGY STAR certified), the work has to be done by a participating contractor, and the application has to be postmarked by December 31, 2026. The program runs first come, first served, and once funds for a tier are exhausted for the year, they're done. That's something to keep in mind if you're sitting on a decision. We saw a couple of rebate tiers run dry by mid-October last year.

NYSERDA Clean Heat, layered on top

The NYS Clean Heat program stacks directly with the PSEG rebate. For a whole-home air source heat pump installation in 2026, NYSERDA adds another $1,000 to $3,000 in incentives depending on the equipment and the building's situation. The rebate is taken off the contract price at the point of sale by the participating contractor, not mailed to you, so you see it on your proposal rather than in a check three months later.

Two pieces to pay attention to. One, the residential Clean Heat rebate is now limited to buildings with one to four units. Single-family homes throughout Suffolk County are fine. Two, your installer has to be a NYSERDA-enrolled participating contractor to apply the incentive. If a contractor's proposal doesn't show a Clean Heat line item, ask why.

There is a separate NYSERDA rebate for heat pump water heaters (HPWH) in the $700 to $1,000 range. If your tank is older than 10 years, it's worth bundling an HPWH into the main heat pump project to capture both incentives at once.

Rate Code 580, the rebate that keeps paying

This one isn't a check, it's a permanent change to your electric bill. Once a heat pump is your primary heating source, PSEG Long Island lets you enroll in Rate Code 580. From October through May, all usage above 400 kWh per month gets a 40 percent discount on delivery charges. During the heating season, that's most of your bill.

For an average Suffolk County home running an air source heat pump as primary heating, Rate 580 alone saves $400 to $800 per heating season in energy costs. It compounds year after year, and it's not capped. It is hands down the most quietly valuable piece of the rebate stack because it never expires. We dug deeper into how the program works in our full PSEG and NYSERDA rebates guide.

The income-qualified path: Home Comfort Plus

If your household income is at or below 60 percent of the area median, PSEG's Home Comfort Plus program is in a class of its own. For income qualified customers, this home comfort program can cover essentially the full cost of the heat pump installation with little to no out-of-pocket expense. We've sized up jobs in Bellport and Medford where the homeowner walked away from a full heat pump and ducted air conversion at zero out of pocket.

The income verification is run by PSEG directly, and the eligibility requirements are strict, but if you think you might be close to the threshold, it's worth a call. The worst that happens is you find out you don't qualify and you go back to the standard rebate stack.

For homeowners who don't qualify as income eligible but still want help managing the upfront cost, energy finance solutions through PSEG and NYSERDA partner lenders make financing the remaining balance straightforward, usually with rates below standard home improvement loans.

What an actual stacked deal looks like in May 2026

Real numbers from a recent proposal in Patchogue. The home was a 1,600 square foot cape with an older oil furnace and a 2-ton central air system that was on its last legs. The homeowners wanted to heat and cool the whole home with one HVAC system and stop buying oil.

Equipment and installation, before rebates: $21,800 for a 3-ton cold climate air source heat pump (ENERGY STAR certified), new air handler, and refreshed ductwork. PSEG Long Island rebate: $7,200. NYSERDA Clean Heat incentive: $1,500. After-rebate cost: $13,100. On top of that, the homeowner is dropping roughly $3,800 a year in oil deliveries and locking in the Rate 580 delivery discount for the entire heating season.

The same heat pump installation in 2025 with the federal 25C tax credit in play would have come out to roughly $13,300 after all incentives. The 2026 stack actually finished slightly better, even without the federal piece, because PSEG's new tiers more than compensated.

That math doesn't hold for every home, and the gap closes if you were planning a gas conversion rather than an oil retrofit. But the headline most people miss is that "no more 25C" does not equal "no more good deal." The deal just moves around.

Where homeowners are leaving money on the table

A few patterns we keep seeing on Long Island. Contractors who aren't enrolled as participating contractors in both the PSEG and NYS Clean Heat programs, so the homeowner gets one rebate but not the other. Equipment specs that meet PSEG's threshold but miss NYSERDA's higher tier for ENERGY STAR cold climate air source heat pumps, costing $500 to $1,000 in additional incentives. Forgetting to enroll in Rate Code 580 after the install, which is a separate phone call to PSEG that some installers don't walk you through. And in a small number of cases, oil-to-gas conversions chosen over oil-to-heat-pump conversions before running the rebate math, which leaves real money behind when the customer would have been just as happy with a heat pump.

If you're weighing the two paths, we walked through the comparison in detail in our oil-to-heat-pump conversion analysis. The post is from earlier in the year but the numbers still hold.

A comprehensive home energy assessment (sometimes called a home energy audit) is also worth bringing up. NYSERDA and PSEG both offer free or low-cost energy audits that flag insulation gaps, air leaks, and home efficiency upgrades that pair well with a heat pump retrofit. A leaky envelope makes a heat pump work harder than it needs to, and a good home performance contractor can often package those efficiency upgrades into the same project.

What to do next

If a heat pump has been on your list and the 25C news scared you off, take another look at the heat pump incentives available right now. The local stack in 2026 is genuinely strong, and PSEG's most popular rebate tiers tend to dry up by late fall. Spring through early summer is the easiest time to lock in pricing and get on the install calendar before the August rush.

Give us a call or text at 631-209-7090 and we'll walk through what your specific home would qualify for. No pressure, just the math.