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.
Heat pumps are exempt from Colorado's 2.9% sales tax.
Heat pump equipment (not the installation) gets a 10% state tax credit.
A federal tax credit of up to $2,000 is available for high efficiency heat pumps.
Xcel Energy offers up to $2,200 in rebates for some heat pump models.
Local governments, utilities, and partner organizations may also offer incentives.
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 credit, you're only eligible if you pay at least that much in taxes.
Income-dependent rebates of up to $8,000 should be available in late 2023 or early 2024 Energy Smart Colorado—but they're not going to be easy to claim. The details are still being ironed out, but basic arithmetic tells you that this program only has the funding for a few hundred thousand homes across the entire US. And it looks like there will be some fairly tight guidelines about which contractors you'll be able to hire. It will not apply retroactively, either. Still, if you're in a low- or moderate-income household though and you don't need a heat pump imminently, you might as well wait to see how the program will work once it's live.
A new law that took effect on January 1, 2023, means that Coloradans who buy heat pumps (and heat pump water heaters) qualify for statewide savings:
A new state tax credit (10%) against the cost of heat pump equipment, up to the amount that you've paid in state taxes. For now, it's only on the books for 2023 and 2024, though it could be extended.
A sales tax exemption (2.9%). The seller simply won't charge the tax, so you'll get the savings at the point of sale.
Keep in mind that these are discounts on the price of the equipment, not the total cost of installation. In most cases, it'll tally up to savings of a few hundred dollars.
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 high-performance mini-splits—basically the same thing).
$1,700 for other air-source heat pumps that meet more modest efficiency and performance specs.
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 50 programs in Colorado offering money for heat pump adoption as of October 2023. (Filter by technology -> energy efficiency -> HVAC -> heat pumps to find them.)
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] heat pump rebate" should steer you in the right direction.
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.