Colorado residents, businesses, and other organizations who install an eligible heat pump through a registered contractor may receive a portion of the tax credit (at least 33.33%) as a discount at the time of installation.

Funding Overview

Type: Upfront discount on installation (tax credit can only be claimed by registered contractors offering discount)
Eligibility: Anyone installing a qualified heat pump in Colorado through a registered contractor
Amount: Varies based on heat pump type

Contact Information
Amanda Morris, amanda.morris1@state.co.us

Eligible Heat Pumps

The heat pump tax credit is available to install the following types of heat pumps or other technology:

• 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

All heat pumps must be Energy Star certified. Air source heat pumps that are split systems must be Air-Conditioning, Heating, and Refrigeration Institute (AHRI) ‘matched’ systems. Heat pumps for space heating/cooling must be designed to meet at least 80% of annual heating needs. More detail about specific requirements for each type of technology is available in the Heat Pump Tax Credit Frequently Asked Questions.

Tax Credit and Discount Amounts 

Registered contractors who claim the tax credit are required to provide a discount off the cost of installing eligible heat pump technology. The table below outlines the minimum required discount a customer will receive for heat pumps installed in 2024 and 2025.

Table. Tax Credit and Discount Amounts (2024-2025)

Heat Pump Type	Tax Credit Amount	Minimum Customer Discount
Air-Source	$1,500	$499.95
Ground-source, water-source, or combined-source	$3,000	$999.90
Water Heater	$500	$166.65

Registered contractors may retain up to two-thirds (or 66.67% for calculation purposes) of the tax credit for heat pumps installed during the 2024 and 2025 tax years. Contractors must provide the remaining value as a discount to the customer. Contractors must clearly and separately display this discount on the customer’s invoice/receipt. For ease of identification, all discounts for the customer should be displayed as “State of Colorado Heat Pump Discount” on invoices. See a sample invoice.

The total tax credit amounts will decrease in tax year 2026 and again in tax year 2029, which will impact customer discount amounts. The Colorado Energy Office will annually review and evaluate the effectiveness of the tax credits and may modify the established percent distribution between registered contractors and customers.

Learn more