Colorado Tax Credits: Heat Pump Incentives
A Colorado State tax credit for heat pumps and heat pump water heaters went into effect on January 1, 2024. The heat pump tax credit is available to install the following types of Energy Star certified heat pumps or other technology:
- air-source heat pump
- ground-source heat pump
- water-source heat pump
- combined-source heat pump
- heat pump hot water heater
- thermal energy network
- variable refrigerant flow heat pump system
The Colorado Energy Office has established guidelines for customers to obtain these tax credits. Among these guidelines,
- Heat pumps for space heating/cooling must be designed to meet at least 80% of annual heating needs.
- A registered contractor must install the eligible heat pump technology.
- Registered contractors are required to provide the tax credit to customers as a discount off the installation cost if they are claiming the tax credit for each specific installation.
- Registered contractors complete and submit the necessary paperwork to the Department of Revenue for the installed equipment each tax season.
- The state will honor each claimed tax credit from registered contractors when they file taxes.
- Customers do not need to file any paperwork to receive the discount as the tax credit is retained by the installing contractor. A Customer Checklist is available to help guide these conversations with a contractor.
- HVAC contractors installing heat pumps and heat pump water heaters are encouraged to apply to become a registered contractor.
- Additional questions are answered in this FAQ document provided by the Colorado Energy Office.
Looking Beyond Tax Credits?
Energy Smart Colorado’s 2026 Energy Efficiency and Conservation Block Grant (EECBG) rebates can help qualifying households pay for weatherization and electrification upgrades. Learn more about available funding and eligibility requirements.
Home Efficiency Rebates may launch in 2026
The Home Efficiency Rebate (HER) Program will support whole-home energy efficiency improvements in income-qualified mobile/manufactured homes.
The Home Efficiency Rebate program will aggressively incentivize performance improvement for multi-family buildings 50,000 square feet or larger.
When a qualified retrofit achieves 20 to 34% energy savings, the rebate may be $2,000 or $4,000 (depending on income qualifications) per dwelling unit, with a maximum of $200,000 per multifamily building.
For a multifamily retrofit that achieves 35% or greater savings, the rebate may be $4,000 or $8,000 per dwelling unit, with a maximum of $400,000 per multifamily building.
Please note, Energy Smart Colorado does not provide tax advice. Tax advisors are best to rely on for guidance on the applicability of tax credits and rebates specific to your household.
What May I Qualify For?
Use this calculator (thanks Rewiring America) to input your zip code, gross income and household size to determine federal, state, and utility tax credits, rebates and incentives that your household could qualify for.
Additional Resources
The Colorado Energy Savings Navigator is an easy-to-use digital tool that connects Coloradans to more than 600 energy rebates (primarily through utility companies) and 18 different energy bill assistance programs. It also identifies the federal tax credits expiring later in 2025.
This database of Colorado energy efficiency and renewable energy tax credits and rebates may provide current incentives.
You can also find all the utility and local government rebates and state tax credit information for electrification improvements on LoveElectric’s website.
