If you live in Colorado, there are financial incentives to help you heat and cool your home more efficiently with air source heat pumps. In addition to the federally funded Inflation Reduction Act (IRA) programs, several utilities throughout the state currently offer heat pump incentives. Check out this complete guide to learn all about Colorado’s air source heat pump rebates and how to claim them.
- Several utilities in Colorado currently offer heat pump rebates and incentives.
- A bill signed in June 2022 includes new heat pump credits rolling out in 2023.
- Additional IRA rebates and credits will become available via a state-run program sometime in 2023.
- Check out the EnergySage Marketplace to receive quotes from local installers and save money by pairing your air source heat pumps with solar!
What’s included in this guide?
- Heat pump rebates currently available in Colorado
- Additional heat pump rebates coming in 2023
- Other ways to save on energy-efficient upgrades in Colorado
What heat pump rebates are currently available in Colorado?
Currently, most of the heat pump rebates and incentives available in Colorado are dependent on where you live in the state as they’re administered through various city or utility-sponsored programs. So, if you live in an area with a utility offering these, you may be able to get money back for installing heat pumps. There are also some federal incentives provided by the IRA that you can leverage.
There are three main types of heat pumps commonly covered under rebates from Colorado utility programs:
- Ducted air source heat pumps: central ducted systems may have certain rebates available depending on the size and efficiency of the equipment.
- Cold climate heat pumps: these heat pumps operate efficiently in extremely cold temperatures; depending on the equipment, they can heat efficiently in temperatures as low as 5 to -15 degrees Fahrenheit.
- Mini splits: some programs call out specific rebates and incentives for mini splits, which are just ductless air source heat pumps.
Denver Climate Action heat pump rebates
This program offers Denver residents a $7,200 rebate for high efficiency heat pumps and $9,000 for cold climate heat pumps. It also includes $4,500 to install mini splits or $5,400 for cold climate mini splits. While this program reached its current capacity in June 2022, its funding is planned to open again – sign up for notifications to join when it’s available.
Gunnison County Electrical Association heat pump rebates
Gunnison County Electrical Association (GCEA) offers a range of $675 to $4,800 in rebates, covering up to 50 percent of your heat pump installation costs. They use tiers to determine the rebate based on the size, efficiency, and if it’s a cold climate heat pump. Learn more about the GCEA rebate tiers and apply.
Holy Cross Energy heat pump rebates
Holy Cross Energy customers could get up to 25 percent up to $3,000 when installing cold climate heat pumps (ducted or ductless mini splits). Additionally, if you’re replacing or don’t have an air conditioning system, you could save up to 25 percent (or $200, whichever is lower) if you choose to install mini splits. Learn more about Holy Cross Energy rebates.
La Plata Electric Association heat pump rebates
La Plata Electric Association (LPEA) offers rebates for various types of heat pumps. As long as your air source heat pumps meet certain efficiency requirements, you can get $1,000 to $2,500 back (depending on the size and efficiency of your system). If you choose to go with cold climate heat pumps, you can save even more: $1,500 to $3,500. The rebate can cover up to 50 percent of your equipment costs. Learn more about LPEA rebates or contact their Energy Management team via email (email@example.com) or phone (970.247.5786) with any questions.
Mountain Parks Electric heat pump rebates
Mountain Parks Electric (MPE) offers a few different tiers of heat pump rebates based on size (number of tons) and efficiency. Their rebates range from $675 to $6,000, covering up to 50 percent of the equipment cost.
They also list a cold climate air source heat pump pilot program that provides a rebate of up to $1,000 per ton. For reference, most heat pumps installed today range from two to five tons, but the size you need varies based on a few factors including your home’s square footage and your heating and cooling preferences. They have limited information available on their website about the cold climate heat pump pilot program, but note that you can call them for more details: (970) 887-3378, extension 6. Learn more about all MPE heat pump rebates.
Xcel Energy heat pump rebates
Xcel Energy is one of the largest utilities servicing Colorado residents. They offer up to $1,000 in rebates when you install high-efficiency air source heat pumps or up to $600 in rebates for mini splits. Xcel Energy also partners with Elevations Credit Union to help provide low interest financing (currently as low as 2.75% for up to $50,000 for 3-15 year loans) to help make purchasing heat pumps more affordable.
Explore more information on Xcel Energy heat pump rebates:
- Details on heat pump rebates
- Details on Xcel Energy’s heat pump rebate process
- For general questions about Xcel Energy’s Colorado residential rebate programs, call 1-800-895-4999.
Other utility-specific incentives and rebates throughout Colorado
Colorado has many other utility companies throughout the state, which may also offer heat pump incentives and rebates for their customers. The amounts and eligibility vary by program, so check with your utility company to learn about any program details, deadlines, and specific equipment that’s covered.
Nationwide heat pump incentives
The IRA brought back the Nonbusiness Energy Property Credit, which previously expired at the end of 2021. It’s now named the Energy Efficient Home Improvement Credit and comes with few enhancements that will roll out later (in 2023). Through the end of 2022, it allows you to claim up to $500 in tax credits, though you can only claim up to $300 on one single item, like a heat pump, central AC, natural gas furnace, or heat pump water heater. Importantly, this is a one-time credit, so once you’ve reached $500, you won’t be able to claim it again. Like with its predecessor, the Nonbusiness Energy Property Credit, you’ll claim this credit when filing your 2022 taxes.
Heat pump rebates coming in 2023
There are some state and federal heat pump rebates and incentives that will become available in 2023.
Statewide Colorado heat pump updates
In June 2022, the Colorado legislature passed a bill (Senate Bill 22-051),which rolls out some statewide incentives to residents and businesses who install heat pumps between January 1, 2023 and December 31, 2024. Details on it include:
- What’s covered: purchase and installation of an air-source heat pump system, ground-source heat pump system, water-source heat pump system, or variable refrigerant flow heat pump system (heat pump system) or a heat pump water heater.
- Tax credit: income tax credit in the amount equal to 10 percent of the purchase price of the heat pump system or heat pump water heater.
- Immediate incentive: you may assign the income tax credit to your heat pump contractor at the time of purchase; they in turn must compensate you for the full nominal value of the tax credit.
Nationwide heat pump rebate and credit updates
The nationwide updates coming in 2023 include via the IRA include:
The Energy Efficiency Home Improvement Credit
We’ve already discussed what the Energy Efficiency Home Improvement Credit means for you in 2022, but starting in 2023, this credit becomes an annual opportunity (versus the current one-time tax credit) with a $2,000 annual credit for heat pumps or heat pump water heaters.
High-Efficiency Electric Home Rebate Program
This provides up to $8,000 in upfront rebates for installing heat pumps. However, this rebate is income-dependent:
- Full rebates: your household income is less than 80 percent of your state’s median household income.
- 50 percent of the rebates: your household income is 80 to 150 percent of your state’s median income.
- Ineligible: your household income is over 150 percent of your state’s median income.
This program also provides up to $4,000 for electrical panel updates and an additional $2,500 for wiring improvements to support adding heat pumps. To help confirm your eligibility, Fannie Mae has an income lookup tool to find the median household income in your state.
The upfront rebates will be available through a state-run program, which is still to be set up (likely sometime in 2023). We’ll continue to update this article as more information becomes available. Read more details on the IRA heat pump rebates and incentives coming in 2023.
Eligibility for Colorado heat pump rebates
You’ll want to make sure that you understand any requirements that center around location, income, or equipment to understand them. Sometimes you may be required to work with specific contractors as well. For example, with Xcel Energy heat pump rebates, you must use a participating contractor from their database to install centrally ducted heat pumps or cold climate heat pumps, but can use any contractor to install mini splits.
Other ways to save on energy-efficient upgrades in Colorado
The heat pump incentives aren’t the only way you can save on making efficient clean energy upgrades in your home. Colorado residents may qualify for incentives and rebates on other energy-efficient options as well, including:
1. Energy storage incentives
The same legislation that provides a 10 percent income tax credit for heat pump purchases also provides a 10 percent income tax credit for purchasing a battery for energy storage in your Colorado home. This credit is also available to transfer to your installer in exchange for them paying you the value of the credit.
2. Free home energy audits
Many utilities including Black Hills Energy let you schedule a free home energy evaluation. These are great assessments to help you look at your overall energy usage and identify ways to save energy throughout your home.
3. Solar incentives
Colorado has some great incentives to go solar including net metering and other credits. Learn more about ways to save when going solar in Colorado.
Power your air source heat pumps with solar
You can maximize your savings from air source heat pumps by heating and cooling your home with solar energy. Create a free account on the EnergySage Marketplace to quickly get solar quotes, compare offers from qualified, trusted local installers, and speak with an Energy Advisor if you have any questions. You can also get a quick savings estimate using our Solar Calculator.
If you’re looking to install air source heat pumps in your home and want to power them with solar electricity, just note it in your account so potential installers can design a system that will accommodate this addition. Some solar installers can also help you design and price out a heat pump system for your home (or refer you to someone who can).