Life After 25C: How the PSEG and NYSERDA Heat Pump Rebates Work 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 grew its heat pump rebate for 2026, and between that, Rate Code 580, and EmPower+ for income-qualified homes, 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 right in line with what it was in 2025, federal credit included.

Here's how the heat pump rebate actually 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 flat whole-house rebate set by income tier, paid through the NYS Clean Heat program that PSEG administers out here, so it is one rebate rather than a PSEG amount plus a separate Clean Heat amount. Equipment still has to be ENERGY STAR certified cold climate air source to qualify. 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

The PSEG Long Island rebate is the heaviest single piece of the picture, and it is a flat whole-house amount set by income tier, not by tonnage. For 2026 the tiers are straightforward:

Market-rate households get $4,000. Moderate-income households (under 80% of area median income), and market-rate homes located in a NYSERDA-designated Disadvantaged Community, get $5,000. Income-qualified households (under 60% of state median income) get $7,500. The amount does not change with the size of the system, so a 2-ton and a 5-ton install at the same income tier get the same rebate.

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.

Where NYSERDA Clean Heat fits, and a myth to drop

Here is the thing a lot of proposals get wrong. The NYS Clean Heat money and the PSEG Long Island rebate are not two separate rebates you add together. On Long Island, PSEG administers Clean Heat, so it is paid out as the single rebate above. If a contractor's proposal shows a PSEG rebate and a separate Clean Heat rebate stacked on top, that is double-counting, and the real number is just the one tier amount. The rebate is usually taken off the contract price at the point of sale, so you see it on your proposal rather than waiting on a check months later. Your installer has to be enrolled to apply it.

What does genuinely stack is NYSERDA EmPower+, a separate program that pays for weatherization and energy-efficiency work for income-qualified households. It can run alongside the heat pump rebate, though if you take IRA HEAR funding through EmPower+ you cannot also take the PSEG rebate, since that is the same Clean Heat money.

There is also 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

If your household income is at or below 60 percent of the state median, you land in the top rebate tier: $7,500 instead of the $4,000 market-rate amount. On top of that higher rebate, income-qualified households can usually add NYSERDA EmPower+, which pays for weatherization and energy-efficiency work (insulation, air sealing, a free home energy assessment) at little or no cost. Between the higher rebate and the EmPower+ work, the out-of-pocket on a conversion can drop a lot for these households.

The income verification is run through the program 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 market-rate rebate.

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 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. This household came in at the income-qualified tier, so the PSEG Long Island rebate was $7,500. After-rebate cost: $14,300. 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. A market-rate home on the same job would take the $4,000 tier and land near $17,800 before the ongoing Rate 580 savings.

In 2025 the same homeowner would have leaned on a smaller rebate plus the $2,000 federal credit. The 2026 rebate is large enough that losing the federal piece barely moves the final number for an income-qualified home like this one, which is the whole point.

That math doesn't hold for every home, and the picture is tighter at the market-rate tier or on 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 to file the PSEG Long Island rebate at all, so the homeowner leaves the entire rebate on the table. Equipment that misses the ENERGY STAR cold climate air source threshold, which disqualifies the rebate completely rather than just trimming it. 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 rebates and savings 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.

Want a quick ballpark before you call? Our rebate calculator estimates the PSEG Long Island rebate for your home in about a minute. When you are ready for exact numbers, 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.