There are lots of heat pump rebates available within Colorado, and the Colorado state government tax credit is no exception.
While it’s very important to check your local county, city, and utility tax credits because they can vary so widely, the great news is that we all get the state one!
In this article quickly explain all the key details of how you can make sure to get this with your heat pump install, because it’s no small amount.
Let’s get into it! And if you have any questions about heat pump incentives for your own home or location, don’t hesitate to reach out to us. It’s what we do.
What Is The Colorado State Heat Pump Tax Credit?
Starting January 1 for their latest iteration of the heat pump tax credit, the State of Colorado has legislated a fully refundable (you get the tax credit whether you owe taxes or not) amount for certain types of heat pump systems if you install them in the same calendar year.
As of now these tax credits are as follows:
| Heat Pump Technology | Total Tax Credit Amount (2025) | Minimum Required Customer Discount |
| Air Source | $1,500 | $499.95 |
| Ground Source, Water Source, Or Combined | $3,000 | $999.90 |
| Heat Pump Water Heater | $500 | $166.65 |
The last column is in bold because this tax credit is a bit unique.
The State requires that your contractor shares at least some of the tax credit with the homeowner or property owner as an up-front discount.
If you run the numbers above, you can see that the minimum share amount is about 1/3 of the total tax credit, but the contractor and you as the homeowner/property owner can discuss and negotiate this, all the way up to 100% of the total tax credit.
Whatever discount to the homeowner/property owner is decided needs to be discounted and applied up front on that first project payment.
In order to get the discount and tax credit, you must follow the State’s exact rules on how to write it into the invoice:
Example Of The Tax Credit Invoice Verbiage Requirement
Direct from the State’s tax credit, you must make sure that your contractor adds this verbiage and notes to the invoice in order for you to get your tax credit!
It has to say “State of Colorado Heat Pump Discount” on it, and written exactly like that.
They may (and most likely won’t) accept it if it doesn’t have it written on there just like this below –
What Types of Heat Pumps is This Eligible For?
There are many different types of heat pumps out there for heating/cooling your home, along with water heating as well.
The great news is that Colorado has included nearly every type available on the market to help you with the costs on your home electrification journey:
- Air-source heat pump
- Ground-source heat pump
- Water-source heat pump
- Combined-source heat pump
- Heat pump hot water heater
- Thermal energy network
- Variable refrigerant flow heat pump system
What About Multifamily And Non-Residential or Commercial Buildings?
More great news here. Multifamily building owners (and their contractor partner of choice) can claim one tax credit per each unit in the building.
For example, if you have a 7-unit complex, you could get up to $1,500 per unit for a mini split / ductless or new ducted air source heat pump unit in each unit.
This would equate to 7 x $1,500 = $10,500 total, with at least 33% or nearly $3,500 required to go to you as the property owner.
One caveat to this is that the heat pump must be at least 80% of the heat load for each unit and must be the primary heat source.
For non-residential and commercial buildings, the tax credit works a bit differently.
We can claim this tax credit for every 4 tons of installed capacity up to a maximum of 100 tons per building.
This calculation would equate to 100 tons / 4 tons = 25 tax credits * $1,500 total tax credit = $37,500 max. That is pretty awesome!
What Heat Pump Contractors Can You Work With?
The state doesn’t mess around, and there stringent rules, certifications, and tests that contractors have to go through to become eligible to offer this tax credit.
You can click here to see the latest Heat Pump Registered Contractors list.
Many of the contractor eligibility requirements are the same for maximizing rebates throughout the entire state. These include things like:
- EPA 608 Certification for handling refrigerants properly
- NITC R78 Brazing Certification for connecting line sets and installation
- City and county mechanical licenses
- Formal registration and vetting by the State of Colorado
- Must be eligible tax payers registered with the state (company owners). SSN, FEIN, and company insurance required, among others.
These rules in place ensure that you’ll work with a professional heat pump installer and company. Or at least its puts you on a good path for a higher probability of success with one!
What Heat Pump Equipment is Eligible?
Not only must contractors be up to snuff, but so does the equipment being installed.
This is a long list, and I think it’s easier to quote directly from the State’s Heat Pump Tax Credit FAQ as to not reinvent the wheel. Each type of heat pump has specific requirements, and you can also dig into the exact policy called HB23-1272 here.
Air Source Heat Pumps (Including Split Systems)
- Must be EnergyStar certified equipment
- Must have a variable speed compressor
- If a split system, must be Air Conditioning Heating and Refrigeration Institute (AHRI) certified matched systems for the specific pair of equipment being installed
- ‘Matched’ systems can be identified by using an AHRI Reference Number and searching for Certificates of Certified Product Performance (Please see the AHRI website)
- Primary heat source – defined as a system designed to provide at least 80% of
- total annual heating for the building. Must be capable of distributing produced
- heat to all conditioned areas of the building.
- Must conform to applicable municipal, state, and federal codes, standards,
- regulations, and certifications
- Equipment must be installed by technicians with safe handling of refrigerants
- training and certified brazing skill as applicable
Ground And Water Source Heat Pumps
- Must be EnergyStar certified equipment
- Has variable speed blowers that meet or exceed efficiency levels listed in the
- National Electrical Manufacturers Association MG1-1993 publication
- Must conform to applicable municipal, state, and federal codes, standards, regulations, and certifications
- Complies with all state and local drinking water guidelines and regulations and public water system requirements
- Primary heat source – defined as a system designed to provide at least 80% of total annual heating for the building. Must be capable of distributing produced heat to all conditioned areas of the building.
- Equipment must be installed by technicians with safe handling of refrigerants training and certified brazing skill as applicable
Heat Pump Water Heaters
- Must be EnergyStar certified equipment
- Must conform to applicable municipal, state, and federal codes, standards, regulations, and certifications
- Equipment must be installed by technicians with safe handling of refrigerants training and certified brazing skill as applicable
Thermal Energy Network Equipment
- Also known as geothermal exchange district, networked geothermal system, geoexchange system, geogrid system, community geothermal heating and cooling district, or geothermal heating district
- Real estate, fixtures, and personal property for distribution infrastructure that provides thermal energy to two or more buildings that are not a campus
- Pipes and loops between multiple buildings
- Network used for heating, cooling or other building services
- Equipment must be installed by technicians with safe handling of refrigerants training and certified brazing skill as applicable
Variable Refrigerant Flow Heat Pump System
- Must be EnergyStar certified equipment
- Has variable speed blowers that meet or exceed efficiency levels listed in the
- National Electrical Manufacturers Association MG1-1993 publication
- Must conform to applicable municipal, state, and federal codes, standards, regulations, and certifications
- Complies with all state and local drinking water guidelines and regulations and public water system requirements
- Primary heat source – defined as a system designed to provide at least 80% of total annual heating for the building. Must be capable of distributing produced heat to all conditioned areas of the building.
- Equipment must be installed by technicians with safe handling of refrigerants training and certified brazing skill as applicable
Wrapping it Up
There are a few more details, but I tried to include the core details on how it works. Things are changing quickly, but this is currently the information that’s available. Here are a few more resources on this tax credit for reference as well:
State of Colorado Heat Pump Tax Credit Website
Form DR-1322 – Heat Pump System or Heat Pump Water Heater Eligibility Certification and Assignment Election. *This form may change for 2025, but it’s the only one listed and mentions filing this one for equipment installed in 2023 so far.
As we get more information on this tax credit we’ll update this page ASAP. I hope this was helpful, and if you need help designing or with your own heat pump installation or project, please contact us here! Thanks so much.
