Colorado Heat Pump Incentives, Tax Credits, & Rebates

If you reside in Colorado, today could be the best time to swap your furnace and AC for an all-in-one high-efficiency and environmentally friendly heat pump. In late 2022, the Centennial State announced a new tax credit and sales tax exemption for heat pump water heaters that went into effect on January 1, 2023. The HVAC experts at The Heat Pump Store Denver explore Colorado Heat Pump Incentives, Tax Credits, and Rebates and the reasons to upgrade your heating and cooling with a heat pump.

A Great Value for Your Budget

We know that you value your money and want to spend less on your heating and cooling costs whenever possible. That’s why our team at The Heat Pump Store is happy to provide you with information about these significant rebates and cash incentives.

The Highest Level of Efficiency

Because ductless heat pumps represent the highest level of efficiency, many utilities and government entities offer financial incentives to help you pay for your heat pump system!

A Ductless Heat Pump is a Great Choice

You can feel good about your choice to invest in a ductless heating system, as it will not only save you money and improve your energy efficiency, but also make a positive contribution to our goal to help improve our environment.

With the variety of energy efficiency and rebate programs available, it is easy to save money with ductless heat pumps. Here is an example of potential savings, combining several available rebates for qualified customers
(Please note that every situation is different, and this is just one example)


  • 1

    City of Denver Climate Action Rebate – Up to $3,500.00  Instant Rebate!

  • 2

    Xcel Energy Cold Climate Mini Split Heat Pump Rebate – Up to $2,200  Cash Back or a credit to your Xcel Energy Account

  • 3

    IRA 25C Tax Credit – Up to $2,000.00 tax credit if you qualify

  • 4

    Colorado State tax credits up to 2.9% on installed equipment if you qualify

  • Must be cold climate models reaching NEEP cold climate criteria –  ask us about qualifying equipment models!
  • Must be Denver City and County Residents
  • Must be Single Family, Condo, or Multifamily up to 4 units

What Are Heat Pump Tax Incentives Available For Coloradans?

Recently, US federal and state governments have offered several tax incentives to spur the adoption of more energy-efficient and environmentally friendly heat pumps. Heat pumps are known for their energy efficiency compared to traditional HVAC systems.

Here are some of the heat pump tax incentives, credits, and rebates available for Colorado residents and businesses:

Federal Incentives Offered By the IRA

Just like all other American taxpayers, eligible Coloradans can take advantage of the heat pump incentives offered by the IRA through the Inflation Reduction Act of 2022. Here is a summary of the savings you can make through this incentive:

  • Federal tax credit: eligible households installing qualifying air-source heat pumps can receive a federal tax credit capped at $2,000 or 30% of the installation cost, whichever amount is lower. To qualify for this credit, you must have a tax liability of at least $2,000, as it operates as a credit against taxes paid.
  • Rebates: Income-dependent rebates capped at $ 8000 were made available in late 2023 and will run through early 2024. This program will only benefit a few hundred thousand homes nationwide, making it competitive. If you are in a low or moderate-income household, consider checking out this program.

Colorado Statewide Heat Pump Tax Incentives

A new law that took effect on January 1, 2023, allows Coloradans who purchase HVAC equipment to qualify for the following statewide savings on heat pump incentives in Colorado:

  • A 2.9% sale tax exemption at the point of sale: The seller won’t charge the tax, allowing you to make some savings.
  • A 10% new state tax credit against the cost of pump equipment, capped at the total amount of state taxes paid: This credit is presently set for 2023 and 2024 but may undergo extensions beyond that period.

In total, the Colorado heat pump tax credit and sales tax exemption sum up to a 12.9% discount on the price of the equipment, not including the installation charges.

Tax Incentives Available Through Local Governments and Utility Companies

Some local governments, utility companies, and partner organizations are also providing additional Colorado heat pump rebates on top of the federal and statewide incentives. Here are some of the programs to maximize:

  • Xcel Energy rebates: Xcel Energy is the leading electrical utility company in the Boulder and Denver metro areas. The company offers the following Colorado heat pump rebates for households that work with a qualified contractor.
  • A $2200 off the total installation expense for a cold-climate heat pump (or high-performance mini-splits)(this rebate is applied per outdoor unit, so installing multiple qualifying outdoor units only multiplies the rebate)
  • Alternatively, a $1,700 off the cost of other air-source heat pumps that meet comparatively modest efficiency and performance specifications
  • City Of Denver rebates: The City of Denver is also incentivizing heat pumps with a $3500 rebate for cold-climate heat pumps.

If you are working with a different utility company, they are likely offering some Colorado heat pump rebates, too. Currently, over 50 programs in Colorado provide savings on heat pump adoption.

Reasons to Adopt a Heat Pump

Here are some reasons why you might consider switching to a heat pump:

Energy efficiency: Heat pumps are known for their high energy efficiency. They use electricity to transfer heat from one space to another instead of directly generating heat. This feature makes them more energy-efficient than traditional heating systems like furnaces or electric baseboard heaters. This efficiency can lead to reduced energy bills over time.

Environmentally friendly: Because they move heat rather than generate it, heat pumps produce fewer greenhouse gas emissions compared to furnaces or other heating systems that burn fossil fuels. This makes them a more environmentally friendly option, especially if you want to minimize your carbon footprint.

Heating and cooling in one: Heat pumps can both heat and cool your home, serving as a two-in-one system. They operate as an air conditioner during warmer months by extracting heat from inside your home and releasing it outside. In colder months, they reverse the process by extracting heat from the outside air (geothermal source) and transferring it indoors.

Let The Heat Pump Store Denver Help You Heat Pump Incentives, Tax Credits, & Rebates

As Colorado embraces a greener future, numerous incentives, tax credits, and rebates are available to support your transition to heat pumps. The Heat Pump Store Denver is your local expert in making the switch to energy-efficient heating and cooling solutions. Contact us today to learn how to save on your heating and cooling system upgrade with heat pump rebates in Colorado.

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