Heating and cooling rebates

If your heating, ventilation and air conditioning (HVAC) system is old, it’s probably inefficient. Replacing it can trim your energy bills and increase the comfort of your home.

SMUD offers up to $3,000 in rebates on energy-efficient heat pump heating and cooling systems installed by a qualifying contractor.

If you are going to be doing multiple improvements, such as a heat pump water heater, a heat pump HVAC system or insulation, our Home Performance Program may be for you. 

Heating and cooling systems, rebates up to $3,000


Multi-stage electric heat pump HVAC upgrade - gas to electric $3,000
Multi-stage electric heat pump HVAC upgrade - electric to electric $750


Must have a qualifying multi-stage (two-stage or variable-stage) HVAC system installed by a participating contractor in the SMUD Contractor Network.

Rebates are subject to availability of funding and must be submitted by a qualified participating contractor through the SMUD’s Contractor Network.

For technical requirements, see table below.


A heat pump HVAC system is simply an air conditioner that can run in reverse to heat or cool your home.

Heat pumps have changed

Today’s multi-stage heat pumps aren’t like older heat pumps that increased your energy costs and left your home uncomfortable. The difference is in the compressor, which is the heart of the HVAC system and responsible for about 80% of the energy consumption. SMUD recommends and provides rebates for new two-stage or variable-stage heat pumps. Here’s how they stack up:

Basic: Single-stage systems operate at one compressor speed—100% —or not at all. Even if you adjust your thermostat setting to heat or cool your home by one degree, the equipment runs at full speed. Because these systems turn on and off frequently, the compressor uses more energy, which increases your energy costs. These systems are not eligible for SMUD rebates.

Better: Two-stage systems can operate at a lower compressor speed (Stage 1- typically about 50%) or on high (Stage 2). This uses half the power of a single-stage system, which reduces your heating and cooling costs. By running longer at a low speed, these systems deliver increased comfort and a longer system life.

Best: Variable-stage systems use even less power because they can run at lower compressor speeds than two-stage systems. They also offer the most energy and bill savings, superior comfort and an even longer system life.

Features and benefits

More comfort. Two-stage and variable-stage systems circulate more air throughout your home, which helps to eliminate hot or cold spots and keep your home at a consistent temperature. Plus, a variable-stage system operates so quietly that you may not even realize it’s on!

Balanced humidity. Systems that have longer runtimes are better at maintaining the ideal levels of humidity in your home by season. Humidity levels are what help you feel cooler or warmer. You’ll notice less humidity in the summer (which helps you feel cooler) and slightly more humidity during the colder months (which helps you feel warmer).  

Better indoor air quality. Because the multi-stage systems run longer, the air filter traps more airborne particulates, lowering the dust and pollen levels inside your home.

Safer, cleaner and healthier. Homes and buildings that power appliances with electricity instead of gas are safer - No open flames, no gas leaks, no carbon monoxide. Residential natural gas appliances can produce pollutants including carbon monoxide (CO), nitrogen dioxide (NO2), formaldehyde (HCHO) and ultrafine particles. These pollutants are harmful and significantly contribute to asthma.

Better for the environment. Heat pump water heaters reduce greenhouse gas emissions by nearly 50% compared to gas water heaters. More than 50% of SMUD’s power comes from carbon-free sources and SMUD’s goal is to be completely carbon free by 2030. When you switch from a gas water heater to a heat pump water heater, you’re investing in a cleaner, carbon-free electric future.

Myth: Heat pumps don’t work well in Sacramento.
Fact: New multi-stage heat pumps heat and cool extremely well in Sacramento’s climate.

Myth: Heat pumps cost too much to use.
Fact: While this may have been true for the old single-stage systems, new multi-stage heat pumps can keep your home comfortable for about half the cost of the old systems.

Myth: Heat pumps produce cold air during the winter.
Fact: It may feel cooler when the heat pump first turns on but the system quickly adjusts to warm your home.


  • Split & mini-split system (1)
    • ≥ 16 SEER or better
    • ≥ Two-stage or variable compressor
  • Packaged system
    • ≥ 15 SEER or better
    • ≥ Two-stage or variable compressor

Heat pump

  • Split & mini-split system (1)
    • ≥ 8.2 HSPF
    • ≥ Two-stage or variable compressor
  • Packaged system
    • ≥ 8.0 HSPF
    • ≥ Two-stage or variable compressor


  • Split & mini-split system (1)
    • Must pass Title 24 via HERS CF3R and/or if new ductwork installed, it must be insulated to ≥ R8.
  • Packaged system
    • Must pass Title 24 via HERS CF3R and/or if new ductwork installed, it must be insulated to ≥ R8.


  • Split & mini-split system (1)
    • Wifi-enabled
    • 7-day programmable
  • Packaged system
    • Wifi-enabled
    • 7-day programmable

(1) Mini-splits must service entire home and meet minimum HVAC system requirements.

Eligibility requirements 

Eligibility for single-family and multi-family dwellings (up to 4 units).

To be eligible for rebates, the resident or homeowner must be a SMUD customer with an active SMUD account. In addition, the home must be individually metered by SMUD. For multifamily dwellings up to 4 units, each unit must be individually metered. 

The rebate is contingent on the project complying with all city/county ordinances, building codes and permit requirements, including inspections.

Manufactured, modular or factory-built homes have additional requirements. 

Eligibility for manufactured, modular or factory-built homes

Manufactured, modular or factory-built homes qualify for a rebate only if all of the following are true:

  • Resident or homeowner is a SMUD customer with an active SMUD account.
  • Home is individually metered by SMUD.
  • Home is subject to state and local building codes. 
    • Contact your local building department to find out if your home is subject to state and local building code.
    • Mobile homes on a chassis and axle, constructed under HUD codes or that have a State of California Community Services Department sticker indicating status as a licensed mobile home MAY NOT QUALIFY. 
    • Homes on a permanent foundation typically DO qualify.


Finance your new heat pump HVAC system with Sustainable Home Improvement Loan

Tax credits

Federal tax credits are also available for qualifying HVAC systems installed between 2017 and 2021.

Tax Credit: 10% of cost up to $300.
Expires: December 31, 2021 
Note: Must be an existing home and your principal residence. New construction and rentals do not apply.

Learn more about these tax credits here


Product must be installed by a participating contractor in the SMUD Contractor Network.

Note: SMUD does not endorse or warrant any workmanship, installation, labor, cost or materials of the contractor you select.

Find a contractor


Up to a $3,000 rebate. (Subject to availability of funding.) 

How to apply for a rebate:

  • Choose a participating contractor from the SMUD Contractor Network.
  • Install a qualifying multi-stage electric heat pump HVAC system.
  • Your contractor will provide the rebate application for your signature and submit the rebate for you.
  • Receive your rebate. Note: Your contractor may offer the rebate amount up front and collect the rebate from SMUD after the project is completed. 

Download a summary of heat pump HVAC rebates, features and benefits.  

Download HVAC flyer

Heating and cooling questions? Please email AdvancedHomeSolutions@smud.org or call 1-916-732-5732.