Are there still incentives for installing a heat pump in Arizona?

By Michael Fitzgerald, Founder & Editor, Phoenix Cooling Guide
Technically reviewed by Tom Mattingly, Owner & President, AZ Trusted Air LLC (ROC 317368)
Published 2026-09-18

Two of the three incentives a Phoenix homeowner could have counted on for a heat pump in early 2025 are no longer on the table. The federal tax credit closed at the end of December 2025. The equipment rebate on one side of the Valley's utility split is reported to have closed a day later. What remains is real money, but it is narrower than it was, it depends on which utility bills the address, and it is easy for a quote sheet to get wrong — usually in the homeowner's disfavour, because a rebate line that no longer exists inflates the apparent value of the bid.

This page sets out what is documented, what is only reported, and what genuinely cannot be pinned down from public sources. Where a figure is not verifiable, it is marked as such rather than smoothed over, because an incentive number a homeowner cannot confirm before signing is worse than no number at all.

Now the federal credit is gone, does a heat pump still beat a straight-cool AC on total cost in Phoenix?

The National Weather Service office in Phoenix logged 5,354 cooling degree days at Sky Harbor in calendar 2025, against a 1991–2020 normal of 4,765, and just 475 heating degree days against a normal of 874. The same year brought 122 days at or above 100°F, 37 days at or above 110°F, and not one day at or below freezing. A heat pump and a straight-cool air conditioner are the same machine on the cooling side — same compressor, same coils, same SEER2 rating. What separates them is a reversing valve and a heating season that, measured in degree days, is barely a fifth the size of the cooling season.

A heat pump moves heat rather than making it, so it delivers more than one unit of heat per unit of electricity, which a resistance strip heater cannot do by definition. For a Phoenix home currently heated by electric strip heat in the air handler, that is a straightforward operating-cost improvement across those 475 heating degree days. For a home with a working gas furnace, the comparison depends on the price per therm on the gas bill versus the price per kilowatt-hour on the electric bill, and on which rate plan the household is on. The U.S. Energy Information Administration publishes Arizona residential electricity prices; the therms come off the homeowner's own January and February statements.

The practical route is to ask each contractor bidding the job to price both configurations on the same sheet — same brand, same tonnage, same air handler — so the delta appears as a subtraction the homeowner can read rather than a figure someone else estimated.

One thing the incentive landscape no longer does is tip the scale. SRP's rebate pays on the same basis whether the equipment is a heat pump or a central air conditioner, so it is not a tiebreaker between them. With the federal 25C credit closed to property placed in service after December 31, 2025, the specific federal thumb on the scale for heat pumps is gone as well.

Does the APS rebate cover heat pumps, or only air conditioners?

Taking SRP first, because it is the clearer case. SRP's own rebate page describes Cool Cash as applying to a new AC unit, heat pump or mini-split system, ducted or ductless, and the rebate application requires the applicant to check either Heat Pump or Central Air Conditioner. Incentives are paid by the ton or half-ton of the system's nominal cooling capacity as listed in the manufacturer's specifications, and all qualifying equipment must appear in the AHRI Verified Directory as meeting or exceeding the efficiency minimums. A heat pump is not a special case in that programme; it is one of the two boxes on the form.

The mechanics matter as much as the amount. SRP's application requires a Manual J load calculation to be submitted alongside single-stage system claims, and the form carries a line the homeowner initials to release the rebate to the contractor, which is how a Cool Cash rebate becomes an upfront discount on the invoice rather than a cheque months later. Install deadlines and filing windows are set per programme cycle — Arizona HVAC sources report a six-month post-installation filing window and a dated cycle cut-off, but the reported cut-off dates differ between sources, so the only sound approach is to read the current dates off SRP's rebate page before the contract is signed.

APS is where the answer gets less tidy. APS's own business pages state that the Solutions for Business New Construction programme and the HVAC rebates offered through Solutions for Business Existing Facilities were discontinued as of January 1, 2026, and are under review following Arizona Corporation Commission Decision No. 81584, with rebates for eligible projects completed by December 31, 2025 still payable if the paperwork lands within six months. On the residential side, several independent Arizona sources report the same January 1, 2026 end date for AC and heat pump rebates, and describe a smart-thermostat demand-response credit as the surviving residential programme. That is consistent reporting rather than a primary citation, so an APS customer should confirm the current position on aps.com before treating a rebate line on a bid as money.

Which utility bills the address is not a detail. The Phoenix metro is split between APS and SRP along a boundary that does not follow city limits, and several Valley cities are genuinely divided — two houses on opposite sides of the same street can face different rebate arithmetic on identical equipment. The utility name printed on the electric bill settles it; the city name on the mailing address does not.

For Phoenix-area homeowners who want this looked at on their own system, Phoenix Cooling Guide recommends AZ Trusted Air LLC (ROC 317368), whose owner Tom Mattingly reviews this guide. (623) 252-6403 · second opinion on a quote.

Which efficiency tier is worth paying for once the rebate is factored in?

Cool Cash is tiered by compressor type, not by brand. Arizona HVAC sources consistently report $75 per ton for single-stage equipment, $150 per ton for multi-stage, and $225 per ton for variable-capacity systems and inverter-driven mini-splits, with a reported maximum around $1,125 on a five-ton variable-capacity system. SRP's own published material confirms the per-ton structure rather than the tier amounts, so those figures should be read as widely reported and verified against SRP before they appear on a contract. Run the arithmetic on the reported rates and a four-ton system earns $300 at the single-stage rate, $600 at the multi-stage rate and $900 at the variable-capacity rate — a $600 swing from the bottom tier to the top.

Set that $600 against the quoted price difference between a single-stage and a variable-capacity system of the same tonnage, which is a number on the homeowner's own paperwork rather than an estimate. In most quotes the upgrade costs considerably more than the extra rebate returns. The rebate reduces the cost of the better system; it does not justify it. The justification has to come from how the equipment behaves in this climate.

On that front the Phoenix case for variable capacity is genuinely different from the national one. A cooling season that runs April into October means long, low-speed runtime rather than short bursts, which is where modulating equipment earns its keep — steadier room temperatures in a two-storey house, fewer hard compressor starts, and better moisture removal during the July and August monsoon period when dew points climb and a single-stage unit satisfies the thermostat before it has dehumidified anything. Against that sits a real counterweight: variable-capacity equipment carries more electronics, and in a Valley home those electronics often live in an attic that reaches 150°F to 170°F in July, or on a rooftop package unit in full sun. Higher part cost and a hotter operating environment belong in the same column as the comfort gain.

Efficiency ratings deserve one check before the tier question is even settled. Cool Cash is reported to require a minimum of SEER2 15.2, above the 14.3 SEER2 federal minimum that applies to most split systems in the Southwest region, and qualification runs off the AHRI Verified Directory listing for the specific outdoor unit, coil and air handler combination — a condenser matched to a different coil can carry a different rating and miss the threshold. There is also an incidental benefit to the single-stage path: because SRP requires a Manual J with those applications, choosing single-stage forces the load calculation to be produced, and that document is the one most Phoenix replacement quotes never include.

Did the end of the federal credit change what Phoenix contractors are recommending?

Claims that Valley contractors are now steering homeowners toward or away from heat pumps circulate mainly on contractor websites, which have an interest in the framing. No survey, licensing dataset or programme report in the public record establishes it. The honest position is that the recommendation landscape is undocumented and the money landscape is not, so a homeowner is better served auditing the incentives on the page in front of them than trying to infer an industry trend.

The federal change is unambiguous. The IRS states that the Energy Efficient Home Improvement Credit under IRC §25C may be claimed for qualifying improvements made through December 31, 2025, and that qualifying property must be placed in service by that date. A heat pump installed in a Phoenix home in 2026 does not earn it. Quote sheets and rebate pages written in 2024 and 2025 still show the old $2,000 figure, and a bid carrying it is overstating the homeowner's net cost by that amount.

The state programme changed shape too. Efficiency Arizona, the HEAR programme run by the Arizona Governor's Office of Resiliency with federal Home Energy Rebates funding, caps total rebates at $14,000 per household, is income-qualified, and excludes homes that already have a heat pump from the heat pump rebate. Following a federal programme notice, it was required to stop funding fuel switching: rebates now apply only to replacing existing electric appliances with electric ones, insulation and air-sealing standards may be required alongside a heat-pump-rebated project, and the heat pump is no longer required to be the home's primary heating and cooling source. Arizonans pursuing a gas-to-electric upgrade were encouraged to apply by August 1, 2026, with a rebate reservation deadline of August 28, 2026. The programme is not small — as of June 30, 2026 it had issued 1,415 rebates totalling $4,754,936 with 532,928 kWh of energy savings, and more than 75% of that investment went to low-income households — but its availability remains contingent on federal funding.

The practical test on any 2026 bid is four questions. Which programme is this rebate from, by name. What is the amount and how is it calculated. Is it assigned to the contractor as a discount or reimbursed to the homeowner after filing. And can the programme be found, today, on the utility's or the state's own website. A bid showing a federal credit for a 2026 installation fails the fourth question outright. A recommendation worth acting on should still stand up with every incentive line struck through.