Heat Pump Incentives

Heat pumps are an excellent investment for homeowners, offering environmental benefits, potential advantages for the electrical grid, lower energy bills. These systems operate efficiently and significantly reduce greenhouse gas emissions compared to traditional heating methods. 

Given these benefits, governments are actively encouraging the adoption of heat pumps in homes by offering various incentives to make installation more affordable. One of the primary initiatives supporting this effort is the Inflation Reduction Act, passed by the federal government in 2022. Additionally, many state and local governments provide their own subsidies to further help people make the switch.

By taking advantage of federal, state, and local incentives, homeowners can significantly reduce the upfront cost of installing a heat pump. Many of these incentives can be combined, allowing homeowners to maximize their savings on installation costs. Below is an overview of various tax credits and rebates currently available. Be sure to carefully review the specific terms and conditions for each incentive to ensure you follow all guidelines. 

Federal Tax Credit for Heat Pumps

How the Tax Credit Benefits Homeowners

Homeowners who install an energy-efficient heat pump are eligible for a heat pump tax credit covering 30% of the cost of the system, including installation, up to a maximum of $2,000. This tax credit for heat pump installations can be combined with additional credits for other qualified upgrades, with a potential total of up to $1,200 for improvements made within the same tax year. The federal tax credit for heat pumps offers a significant way to lower the overall cost of upgrading to an energy-efficient system.

Energy Star, the official U.S. government website, lists the following heat pump types eligible for this tax credit for heat pump:

• Air Source Heat Pumps
• Heat Pump Water Heaters
• Biomass Stoves or Boilers

Switch Together offers cold climate air source heat pumps, a highly effective option that works in both warm and colder temperatures. These heat pumps qualify for various tax credits, as detailed throughout this page. 

Xcel Energy Colorado Rebates

Xcel Energy, a major U.S. utility company, offers rebates for residents installing heat pumps. The rebate varies depending on the type of heating and cooling system. For air-source heat pumps, Xcel provides $2,250 per heating ton at 5°F, with the ton size typically ranging from 2 to 5 tons, depending on the product and temperature requirements. On average, this could be $6,750 for a 3-ton heat pump. For more details, you can check all available rebates here.

Colorado State Tax Credits

Colorado residents can take advantage of state tax credits for heat pumps to make their home heating and cooling systems more efficient and affordable. The available heat pump tax credits are:

• Air Source Heat Pumps: $1,500 credit, with a minimum customer discount of $499.95
• Ground-source, Water-source, or Combined-source Heat Pumps: $3,000 credit, with a minimum customer discount of $999.90
• Water Heaters: $500 credit, with a minimum customer discount of $166.65

For more information on Colorado State Tax Credits for Heat Pumps, visit the official website.

With a wide range of tax credits and rebates available, upgrading to an energy-efficient heat pump has never been more accessible. These incentives simplify the transition to sustainable heating and cooling solutions for homeowners. Since heat pump tax credits and rebates are subject to change, we will regularly update this page to ensure you have the latest information.