TL;DR. For most middle-income PSE customers, the realized 2026 stack is $3,200 in concrete dollars: $1,200 PSE Trade Ally instant rebate + $2,000 federal 25C credit. Income-qualified households add $1,000-$2,000 more. Federal HEEHRA may add up to $8,000 when Washington activates the program. The PSE rebate is instant on your invoice, no separate filing.
Direct answer, the full 2026 stack
| Incentive | Value | How to claim |
|---|---|---|
| PSE Trade Ally instant rebate | $1,200 | Applied to invoice at install (no filing) |
| Federal 25C tax credit | 30% up to $2,000 | Claim on your federal return next April |
| Income-qualified PSE adder | +$1,000-$2,000 | Apply via PSE income verification |
| Federal IRA HEEHRA rebate (income-qualified) | Up to $8,000 | Once Washington state activates the program |
| Panel upgrade portion of 25C | Included in $2,000 cap | Documented separately, same return |
| Battery storage 25D credit | 30% (no cap) | If paired with battery, separate credit |
For most middle-income PSE customers, the actual realized stack in 2026 is $3,200 in concrete dollars ($1,200 PSE + $2,000 federal credit, assuming a $7,000+ install). Income-qualified households can add another $1,000 to $10,000 depending on program availability.
How the PSE instant rebate actually works
PSE’s Trade Ally program is the most efficient incentive in the stack because it’s instant. No paperwork on your end. No 6 to 8 week reimbursement wait. The rebate is applied directly to your invoice at install.
To qualify:
- Equipment must be AHRI-certified at minimum HSPF2 8.1 / SEER2 15
- Installer must be a PSE Trade Ally
- System must displace a fossil-fuel heating system (gas, oil, or propane), not replace existing electric resistance
The mechanics:
- Your installer (us) handles the PSE filing internally
- Invoice shows: equipment + install $X, minus PSE rebate $1,200, net total
- PSE reimburses the installer directly after install verification
We’re a PSE Trade Ally. Every heat pump quote we write has the $1,200 priced in.
The federal 25C tax credit (Section 25C of the IRC)
The federal credit is 30 percent of your install cost, capped at $2,000 per year for heat pumps and HPWHs. For most full heat pump installs in Seattle ($14,000 to $20,000 net), the 30 percent calculation hits the $2,000 cap easily.
What qualifies:
- Equipment must be ENERGY STAR Cold Climate certified
- Equipment must be installed in your primary residence (not a rental)
- Installation must be performed by a licensed contractor
What doesn’t:
- Air-source heat pumps not on the ENERGY STAR Cold Climate list (less common in PNW now, but worth checking)
- Equipment installed at a rental property or second home
- DIY installations
Claiming the credit:
- IRS Form 5695, “Residential Energy Credits”
- Attached to your federal 1040
- Documentation: receipt, manufacturer certification, AHRI rating
We provide the documentation packet at install completion. Your tax preparer files Form 5695 with your return.
Stacking the panel upgrade portion of 25C
This is the part most homeowners miss. The federal 25C credit also covers panel upgrades when required to enable the heat pump install. The panel upgrade cost folds into the same $2,000 cap.
Example math:
- Heat pump install: $14,000
- Panel upgrade required for heat pump: $3,500
- Total qualifying expense: $17,500
- 30 percent calculation: $5,250
- Cap applied: $2,000 credit
Without the panel upgrade folded in, you’d still hit the $2,000 cap from the heat pump alone, so the panel upgrade portion looks redundant. But it’s not, because:
- Without folding in panel: You’d need to justify the panel upgrade as a separate $0 incentive
- With folding in: The panel upgrade is documented as part of the qualifying scope, which matters for any future audit
Get the documentation right.
Income-qualified PSE adder
PSE offers an additional rebate for income-qualified households. Tiers are based on percent of state median income.
| Tier | Income limit (approx, family of 4) | Additional rebate |
|---|---|---|
| 80% SMI | ~$98,000 | +$1,000 |
| 60% SMI | ~$73,000 | +$1,500 |
| Below LIHEAP | varies | +$2,000+ |
PSE handles income verification. You provide documentation through their income-qualified program portal. The adder is also applied as an instant rebate, not a check.
If you qualify, this is the highest-value action you can take. The income tier adders alone can bring the realized rebate to $2,200 to $3,200 instantly.
Federal HEEHRA rebate (when Washington activates it)
The federal Inflation Reduction Act created a $4.5 billion Home Electrification and Appliance Rebate program (HEEHRA). Each state administers its own version once activated. Washington’s program is in implementation phase as of early 2026.
When fully active, HEEHRA could provide:
- Up to $8,000 for heat pump installation (income-qualified)
- Up to $1,750 for heat pump water heaters
- Up to $4,000 for panel upgrades
- Up to $2,500 for electrical wiring
Income limits:
- Less than 80% area median income: 100% of project cost covered (up to caps)
- 80% to 150% AMI: 50% of project cost covered
We update our quotes as Washington’s HEEHRA implementation matures. As of this writing, the program is not yet generating concrete rebates for Seattle homeowners but is expected to come online during 2026.
Battery storage stacking (Section 25D)
If you’re pairing the heat pump install with battery storage (Tesla Powerwall, Enphase, FranklinWH), you can stack the 25D Residential Clean Energy Credit.
- 30 percent of battery system cost
- No cap on dollar amount
- Applies to storage of 3 kWh or more
This is the most generous credit in the stack but only applies if you’re installing battery storage, not the heat pump itself. We mention it because some homeowners doing whole-home electrification stack everything at once.
Cost scenarios
Two typical scenarios:
Scenario 1: standard middle-income household
- 3-ton Mitsubishi M-Series in a 1,900 sq ft Kirkland home
- Existing 200A panel adequate
- Gross install cost: $16,800
- PSE Trade Ally instant rebate: -$1,200
- Net at install: $15,600
- Federal 25C credit (claimed April 2027): -$2,000
- True net cost: $13,600
Scenario 2: income-qualified household with panel upgrade
- 4-ton Mitsubishi M-Series in a 2,400 sq ft Renton home
- 100A → 200A panel upgrade required: +$3,200
- Gross install cost: $20,800
- PSE Trade Ally instant rebate: -$1,200
- PSE income-qualified adder (60% SMI tier): -$1,500
- Net at install: $18,100
- Federal 25C credit (capped at $2,000): -$2,000
- True net cost: $16,100
The income-qualified adder is $1,500 of free money for households that qualify and don’t apply. We help with the income verification documentation as part of consult.
What we do as your Trade Ally
- Price the PSE instant rebate into the quote (not as a “rebate available, ask us”)
- File PSE paperwork on your behalf for the instant rebate and any income-qualified adders
- Provide documentation packet for your federal tax credit (AHRI rating, manufacturer certification, install receipt)
- Document panel upgrade qualifying scope so it’s properly included
- Update you when HEEHRA activates in Washington