Heat pump heating and cooling: replacing your furnace and AC, cost and rebates

For Silicon Valley homes · Updated October 2026 · Sources below

A heat pump heats and cools with one system by moving heat instead of burning gas, so it can replace both a furnace and a central AC. A properly installed air-source heat pump can deliver up to three times more heat energy than the electricity it uses. It needs a permit and any required testing, and local electricity providers offer rebates when it replaces gas heat.

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The short version

One system for heating and cooling - replaces a furnace and AC
Can deliver up to 3 times more heat energy than the electricity it uses (DOE)
Typical install: about $4,200 - $7,600 (national); Bay Area usually higher
Needs a permit; permitted work triggers any required HERS testing
Local rebates exist - some programs require you to apply before installing

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What it costs

Install a heat pump$4,200 - $7,600

Ask about rebates - they can lower the cost a lot.

Typical ranges from published cost guides - mostly national figures. Bay Area prices usually run higher. Your actual price depends on your home and the job, and a pro gives you the real number. Source: HomeAdvisor cost guide (national) (Jun 2026). Have a quote? Check it with the Quote Explainer

Good times to switch

Your AC has failed or needs a major repair
Your furnace is near the end of its life
You've never had AC and want cooling
You're adding a room that needs heating and cooling
You want to move off gas, or pair it with solar

Before you choose

Ask for a load calculation for your home, not just a match to the old unit's size - oversized systems cycle on and off and waste energy.
Ducted or ductless: a ducted heat pump uses your existing ducts; a ductless mini-split needs only a small wall opening per indoor unit and can heat and cool rooms separately.
Have the ducts tested and sealed if needed - leaky ducts waste what the heat pump delivers.
Ask an electrician or the contractor whether your panel has room for the new circuit.
Compare efficiency ratings: HSPF for heating, SEER for cooling, and look for the ENERGY STAR label.
Apply for rebates before installation if the program requires it.

In Silicon Valley

Bay Area Air District rule: starting in 2029, only zero-NOx furnaces can be sold or installed in the Bay Area - and right now the only zero-NOx options are electric. The rule applies only to new equipment, and the Air District has said it may adjust the timeline.
Local rebates: San José Clean Energy lists rebates for ducted heat pumps and ductless mini-splits, and Silicon Valley Clean Energy offers a rebate for heat pump HVAC replacing a gas furnace. SVCE requires approval before the system is installed. See the Rebate Finder for your city's programs.
California's energy code: replacing heating or cooling equipment needs a permit, permitted work triggers any required HERS testing, and HERS paperwork is needed to close the permit. You can ask for the completed HERS forms or hire a rater independent of your contractor.
The federal tax credit for heat pumps (25C) ended at the end of 2025 and isn't available for new installs.

Questions homeowners ask

How much does a heat pump cost in the Bay Area?

National cost guides put a heat pump install at about $4,200 to $7,600. Bay Area prices usually run higher, and duct work, an electrical panel upgrade and the number of indoor units change the price. Local rebates can bring it down.

Do heat pumps work in Silicon Valley winters?

Yes. ENERGY STAR heat pumps are tested for performance down to 5°F and keep running below that. Heat pumps work well in most of the U.S. except where temperatures stay below freezing for long stretches.

Are there rebates for heat pumps in Silicon Valley?

Yes. Local electricity providers such as San José Clean Energy and Silicon Valley Clean Energy offer heat pump rebates when you replace gas heating, and some cities add more. Amounts change and some programs require approval before you install, so check the Rebate Finder first.

Is there still a federal tax credit for heat pumps?

No. The IRS energy efficient home improvement credit covered heat pumps placed in service from 2023 until the end of 2025. Talk to a tax professional about anything installed before then.

Do I need a permit to install a heat pump?

Yes. Replacing heating or AC equipment needs a permit in California, and permitted work triggers any required HERS testing, such as duct testing. Your contractor normally pulls the permit - a contractor who skips it is a red flag.

Do I have to replace my gas furnace with a heat pump?

Not if it's working. The Bay Area Air District's rule applies to new furnaces sold or installed starting in 2029, not existing ones. When yours does need replacing, a heat pump is one of the zero-NOx options.

Should I get a ducted heat pump or a ductless mini-split?

If you have ducts in good shape, a ducted heat pump usually replaces the furnace and AC most simply. Ductless mini-splits need only a small wall opening per indoor unit and let you control rooms separately, which suits homes without ducts and additions.

Do you need a permit?

Yes - replacing heating or AC equipment needs a permit in California.

General guidance based on California's building code - your city can have stricter rules, and zoning, historic and HOA rules can apply too. Check with your city's building department before you start.

Check the rule for your city

Rebates: Heat pump heating & AC

San José Clean Energy EcoHome Rebates
Silicon Valley Clean Energy Home Rebates
Silicon Valley Power Residential Rebates
City of Palo Alto Utilities Rebate Hub
Central Coast Community Energy rebates

Rebate programs change often and money runs out. Amounts are from each program's page as of Oct 2026 - always confirm on the program page, and check whether you must apply before you buy or install.

See the rebates for your ZIP

Questions to ask the pro

Did you do a load calculation for my home?
What are the HSPF and SEER ratings, and is it ENERGY STAR?
Does my electrical panel have room, or will I need an upgrade?
Are the permit, HERS testing and any duct sealing in the price?
Will you help with the rebate application before installing?
Where will the outdoor unit go, and how loud is it near windows and neighbors?

Before you sign, check the contractor's license at cslb.ca.gov. How to hire a contractor in California

Go deeperReplacing your furnace or AC: is a heat pump right for you?

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