If you're considering a heat pump for your Colorado home, 2026 is one of the best years to do it. Between state and federal incentives, you could save $1,000 to $3,000+ on your installation. Here's exactly what's available and how to claim it.
Colorado State Heat Pump Tax Credit
Colorado provides a state income tax credit of at least $1,000 for homeowners who install a qualifying heat pump system. This applies to air-source heat pumps, ductless mini-split systems, and hybrid dual-fuel setups. The credit is applied when you file your Colorado state taxes.
- Minimum credit: $1,000 for qualifying systems
- Applies to: Air-source heat pumps, mini-splits, dual-fuel systems
- Requirements: Must be installed by a licensed contractor in Colorado
- How to claim: Include with your Colorado state tax return
Federal Energy Tax Credit (25C)
The federal Inflation Reduction Act provides a separate tax credit worth 30% of your total installation cost, up to $2,000 for qualifying heat pump systems. This is in addition to the Colorado state credit — you can claim both.
- Credit amount: 30% of total cost, max $2,000 per year
- Qualifying systems: Heat pumps meeting CEE Tier requirements
- Includes: Equipment and labor costs
- No income limit: Available to all taxpayers regardless of income
Xcel Energy Rebates
If Xcel Energy is your electricity provider (which covers most of the Denver metro), additional rebates may be available for qualifying high-efficiency heat pump installations. Rebate amounts vary by equipment type and efficiency rating. Ask us for current amounts when you call for your estimate.
Example Savings on a Typical Installation
| Item | Amount |
|---|---|
| Heat pump system installed | $9,500 |
| Colorado state credit | −$1,000 |
| Federal 25C credit (30%) | −$2,000 |
| Your net cost | $6,500 |
Plus, heat pumps typically reduce heating and cooling costs by 20–40% compared to traditional furnace and AC combinations, so the savings continue every month.
We Handle the Paperwork
On Time Heat & Air provides all documentation you need to claim both state and federal tax credits. We give you the manufacturer certificates, itemized invoices, and efficiency ratings required for your tax filing. We've helped hundreds of Colorado homeowners claim these incentives.