Colorado heat pump incentives: State rebates and credits available in 2026

Ready to swap your furnace and AC for an all-in-one heating and cooling system? Colorado homeowners can save thousands by switching to energy-efficient, all-electric heat pumps.

Modern heat pumps are built to handle Colorado winters. They heat and cool your home, potentially replacing both your furnace and air conditioner with a single system that reduces monthly energy costs while providing more consistent comfort. Heat pumps are more energy-efficient than traditional heating systems. When you pair a heat pump with solar panels, you can run your heating and cooling on free electricity from your roof.

While federal tax credit for heat pumps expired after 2025, Colorado's combination of state tax credits, utility rebates, and new local programs still makes heat pumps a financially smart upgrade for many homeowners in 2026. For income-qualified households, especially, the available incentives can cover a substantial portion of the total installation cost, but most homeowners will see long-term energy savings.

Here's what's available now and how to make the most of it.

Disclaimer: This article is not intended as tax or financial advice—consult a licensed professional with specific questions about tax credits.

The federal Energy Efficient Home Improvement Credit (25C) was worth up to $2,000 for qualifying heat pumps installed through 2025. With the passage of the One Big Beautiful Bill Act in July 2025, that credit expired permanently for heat pumps placed in service after December 31, 2025.

The federal Residential Clean Energy Credit (25D)—which covered geothermal heat pumps at 30% of total system cost with no cap—also expired at year's end.

If you installed a qualifying heat pump in 2025, you can still claim the 25C credit when you file your 2025 federal tax return using IRS Form 5695. But for new installations in 2026, the federal credits are off the table.

The good news: Colorado's state and utility programs are more than picking up the slack for most homeowners, and a major new regional rebate program is launching later this year.

Colorado's state heat pump tax credit—which has been running since January 2024—is still active in 2026, though the credit amounts were reduced as part of a planned phase-down. This program is entirely separate from federal credits and unaffected by federal policy changes.

Here's how it works: The HVAC contractor who installs your heat pump claims the state tax credit and is then required to pass at least one-third of the credit value to you as an upfront discount on your invoice. You don't file any paperwork—the savings show up right on your bill at the time of installation.

2026 Credit amounts

Source: Colorado Energy Office

All heat pumps must be Energy Star-certified. Air-source systems must also be AHRI-matched and designed to meet at least 80% of your home's annual heating needs. The credit amounts decreased from 2024–2025 levels (when air-source credits were $1,500) per the program's built-in phase-down schedule, and will decrease again in 2029.

Note that many registered contractors pass along more than the required minimum discount—it's worth asking about this when you get quotes.

In November 2025, the Colorado Energy Office launched its Home Electrification and Appliance Rebate (HEAR) program. For households that qualify based on income, this program can dramatically reduce the cost of going electric.

HEAR provides point-of-sale rebates—meaning the discount is applied upfront by a registered contractor, not as a check you wait for later. Rebates are available for heat pumps, heat pump water heaters, insulation, electrical panel upgrades, and more.

Who qualifies?

Eligibility is based on your household income relative to the Area Median Income (AMI) in your county:

• Up to 80% AMI: Rebates can cover up to 100% of project costs

• 80% to 150% AMI: Rebates cover up to 50% of project costs

A household of two in the Denver metro area falls below 150% AMI at an annual income of roughly $168,000. You can find AMI tables by county on the Colorado Energy Office website.

Key rebate amounts

Important: HEAR and HER (Home Efficiency Rebates) cannot be combined to fund the same project, though you can use both programs for different upgrades. HEAR can be stacked with the Colorado state credit and utility rebates.

HEAR currently covers single-family homes and is expanding to condos, apartments, and manufactured homes this year. The HER program for manufactured/mobile homes and large multifamily buildings (50,000+ sq ft) is also rolling out.

Several utility companies offer rebates that can stack on top of the state and federal programs.

Xcel Energy

The rebate that applies to the greatest number of Coloradans comes from Xcel Energy, the main electric utility in the Denver and Boulder metro areas. Its heat pump rebates, as of 2025, if you work with a qualified contractor, are:

• Air source heat pump: $300/cooling ton

• Cold climate heat pump: $750/heating ton

Xcel no longer advertises rebates on its website, so amounts may vary based on the contractor.

Other Colorado utilities

If you're served by a different utility, you likely still have options. According to DSIRE, a database of clean-energy incentives, more than 40 energy efficiency programs operate in Colorado. A few worth knowing about:

• United Power: Up to $2,500 in heat pump rebates

• Longmont Power: Up to $4,000 in rebates

• Platte River Power Authority (Fort Collins, Longmont, Loveland, Estes Park): Rebates available for qualifying systems

Check your utility's website directly for current amounts and requirements.

Your city or county may offer additional rebates that stack on top of state and utility programs.

Denver: The Denver Office of Climate Action, Sustainability, and Resiliency offers a heat pump rebate worth 40% of total costs, capped at $1,200.

Boulder County: Residents can access rebates through Energy Smart Colorado, worth up to $400 for qualifying heat pump installations.

Summit County and mountain communities: The High Country Conservation Center offers additional Energy Smart rebates for residents in Summit County communities. Xcel also provides elevated "Mountain Energy Project" rebates in select high-altitude ZIP codes, including Breckenridge, Dillon, Frisco, and Silverthorne.

A quick search for your town name and "heat pump rebate" is usually the fastest way to surface local options. Each program has its own application process, so check the relevant websites directly for instructions.

Power Ahead Colorado: A new regional program in 2026

One of the bigger stories in Colorado's incentive landscape right now is Power Ahead Colorado, a program launched in January 2026 by the Denver Regional Council of Governments (DRCOG). It's backed by nearly $200 million in EPA Climate Pollution Reduction Grant funding—money that survived multiple rounds of federal funding rollbacks.

The program's goals include $40 million earmarked specifically for heat pump and water heater rebates for the Denver metro area, with rebate amounts to be finalized in spring 2026. It also includes free heat pump installations for roughly 2,000 low-income households, energy advising services, and workforce training for nearly 5,000 heat pump installers.

Keep an eye on the Power Ahead Colorado website for rebate details as they're released.

One of Colorado's real advantages is that most of these programs can be layered on top of each other. For example, an Xcel customer who qualifies for HEAR could combine the state credit, Xcel rebates, and HEAR discounts—potentially saving up to $15,000—applied upfront by a registered contractor, with no waiting for reimbursement checks.

The right combination depends on your utility, income, and equipment choice. Your contractor should be able to walk you through exactly which programs apply to your project, and a good one will help you maximize every dollar. If you're not sure where to start, EnergySage's Energy Advisors can help you compare quotes and navigate your options.