Colorado heat pump incentives: 2024 guide

Ready to swap your furnace and AC for an all-in-one heat pump? Most Coloradans should qualify for at least a few thousand dollars in savings on these high-efficiency, environmentally friendly HVAC systems—including new models that can handle the coldest days of the Colorado winter.

Like all American taxpayers, Coloradans are eligible for all of the heat pump incentives available through the Inflation Reduction Act of 2022 (IRA). We've covered those benefits in detail here, but in summary:

• Any household can claim a $2,000 federal tax credit (or 30% of the price, whichever is less) against the cost to install an air-source heat pump that meets modest efficiency requirements. Since it’s a tax credit, rather than a direct rebate, you’re only eligible for as much free money as you’re on the hook to pay the IRS per year. You can claim the rebate with tax form 5695, the same one you'd use for solar panels.

• Income-dependent rebates of up to $8,000 might be available in late 2024, according to Energy Smart Colorado. (The date of availability keeps sliding backwards.) If you’re counting on those rebates, you should wait until the programs are actually in place for two important reasons. First, they’re highly unlikely to apply retroactively to a system that you’ve installed before the program's start date. Second, relatively few households will be able to claim the rebate, even those that are eligible based on income.

A new law that took effect on January 1, 2024 has made Energy Star-certified air source heat pumps eligible for a $1,500 tax credit.

It's actually a tax credit for the HVAC contractor that installs the heat pump, if they're on the state's list of qualified contractors. They're obligated to pass along at least a $500 discount to the purchasing customer, and will handle all the paperwork—there's nothing that homeowners need to do to take advantage of this discount.

A couple of older statewide heat pump tax credits were originally scheduled to be in effect through the end of 2024. But a spokesperson for the state energy office confirmed with EnergySage that those incentives been discontinued in favor of the contractor-based program.

Several utility companies, local governments, and their partner organizations offer extra rebates that can stack on top of the state and federal programs.

The one that will apply to the greatest number of Coloradans comes from Xcel Energy, the main electrical utility in the Denver and Boulder metro areas. Their heat pump rebates as of October 2023, if you work with a qualified contractor, are:

• $2,200 off the total installation cost for a cold-climate heat pump or mini-split.

• $1,700 for other air-source heat pumps that meet more modest efficiency and performance specs.

Note that the efficiency requirements for the top rebate tier are quite high. Many popular, highly rated cold-climate heat pumps would only qualify for the $1,700 rebate. It some cases, it could be a better deal to opt for one of those heat pumps, despite the smaller rebate.

If you're served by a different utility company, they probably have some kind of rebate, too. According to DSIRE, a database of clean-energy incentives, there are more than 40 programs in Colorado offering rebates for heat pumps as of January 2024.

That database doesn't include rebates that might be available through your city or county government. For example, Denver has its own heat-pump rebate program, while Boulder County residents can find rebates through Energy Smart Colorado.

A quick Google search for your town name and "heat pump rebate" should steer you in the right direction.

Each utility and municipality has its own process for claiming the incentives, so consult the relevant websites for instructions.

When you sign up for the EnergySage Heat Pump Marketplace, you'll get an instant estimate of how much it might cost to install a heat pump in your home based on real-world quotes for similar homes from vetted installers. You can schedule consultations with seasoned pros. If you want some independent guidance, one of our Energy Advisors can help you through the process. We're already the country's largest marketplace for solar energy, and now we've brought that clean-energy experience to heat pump shopping. Learn more here.