The federal tax credit most Colorado homeowners still ask us about no longer exists. Section 25C, worth up to $2,000 on a qualifying heat pump, expired for equipment placed in service after December 31, 2025. The federal HEAR rebate that a lot of people were waiting on closed to new single-family applications in Colorado on August 1, 2026.
We lead with that because we get the question on nearly every estimate, and quoting a homeowner a number that no longer exists is a bad way to start a job.
The money that remains is state and utility money, and in the north Denver metro it is larger than the federal credit ever was. On a typical 3-ton cold climate system in Westminster, Broomfield, Thornton, Northglenn, Arvada or Longmont, the stack still comes to roughly $9,250, and most of that is Xcel Energy.
Below is what is open as of August 2026, what each program pays, who qualifies, and an honest look at what a heat pump does to your utility bill. That last part includes the cases where it does not save you money, because you deserve to know that before you spend, not in February.
Colorado heat pump rebates at a glance
| Program | Value | Status, August 2026 |
|---|---|---|
| Xcel Energy cold climate heat pump rebate | $2,250 per heating ton | Open. The largest single incentive. |
| Power Ahead Colorado (DRCOG) | $1,500 | Open. Launched June 29, 2026. |
| Colorado heat pump tax credit | $1,000 for air source | Open. Claimed by your contractor. |
| Federal HEAR rebate | Up to $8,000 | Closed to new single-family applications. |
| Federal 25C tax credit | Up to $2,000 | Expired December 31, 2025. |
| Denver Climate Action (CARe) | Varied | Ended in 2025. |
Three of the six are gone. The three that remain stack with one another.
What closed, and why the timing matters
The federal 25C credit ended with the 2025 tax year
Section 25C, the Energy Efficient Home Improvement Credit, returned up to $2,000 on a qualifying heat pump. It terminated for property placed in service after December 31, 2025. If your system went in during 2025 and you have not filed yet, ask your tax preparer whether you can still claim it on that return. If you are installing now, it is not available to you.
Federal HEAR rebates are closed in Colorado
The Home Electrification and Appliance Rebates program offered income-qualified households up to $8,000 toward a cold climate heat pump. Front Range funding ran out in April 2026, and the Colorado Energy Office closed single-family applications statewide on August 1, 2026. This one mattered, because it was the deepest help available to lower and moderate income households.
The practical result is simple. Every remaining heat pump rebate in Colorado comes from the state or your utility. If a contractor quotes you a federal number in 2026, ask them to show you the program.
What is still available in 2026
1. Xcel Energy cold climate heat pump rebate: $2,250 per heating ton
This is the anchor of the whole stack. Xcel pays $2,250 per heating ton, rated at 5°F, for qualifying cold climate heat pumps, ducted or ductless. On the systems we install most often that works out to roughly:
- 2-ton system: about $4,500
- 3-ton system: about $6,750
- 4-ton system: about $9,000
Four things about this rebate cause most of the confusion we see:
- You need residential electric or natural gas service from Xcel Energy in Colorado. Either account type qualifies, including split households that buy electricity from a co-op and gas from Xcel. The tighter requirement is on the equipment rather than the account: the program is built around cutting gas use, so the system being replaced generally needs to be a gas furnace or a gas boiler.
- The equipment has to be cold climate certified and correctly matched. Xcel pays on the AHRI-certified rating of the outdoor and indoor units together, not on the label of the outdoor unit alone. A mismatched pair can be a perfectly good system and still fail the rebate.
- Standard heat pumps pay far less. A non-cold-climate air source heat pump is rebated at roughly $900 per cooling ton. Cold climate equipment costs more up front, and the difference in rebate more than covers it.
- Paperwork decides whether you get paid. Xcel wants the invoice, the AHRI certificate, a signed rebate form and a commissioning sheet. Any one of those missing puts the claim on hold.
We file the Xcel submission as part of the install. You sign one form and we handle the rest, including the AHRI certificate and the commissioning documentation.
2. Power Ahead Colorado: $1,500, no income limit
Power Ahead Colorado is administered by the Denver Regional Council of Governments and funded at roughly $40 million over four years. Applications opened June 29, 2026. It pays $1,500 for a cold climate certified heat pump in an existing building, the same amount whether the system is ducted or ductless.
What makes it unusual is that there is no income cap. Most of the deeper rebates are means tested. This one is not.
Three things to know:
- It covers DRCOG-participating municipalities across nine counties: Adams, Arapahoe, Boulder, Broomfield, Clear Creek, Denver, Douglas, Gilpin and Jefferson, plus parts of Weld. Most of our service area falls inside it. A few outlying addresses do not, and we check before we quote.
- It works on pre-approval. The application goes in before installation. Install first and apply after, and you have most likely given up the $1,500.
- It does not stack with HEAR or HOMES, since those draw on the same federal funding. With HEAR closed, that restriction rarely comes up in 2026.
The pre-approval requirement is the reason it is worth calling before you schedule rather than after.
3. Colorado heat pump tax credit: $1,000
Colorado’s state heat pump tax credit is worth $1,000 for an air source heat pump installed on or after January 1, 2026. Ground-source, water-source and combined-source systems are worth $2,000, and heat pump water heaters $250.
Homeowners usually expect to file for this one themselves. You do not. A registered contractor claims the credit and is required by statute to pass at least one third of the value back to you as a discount on the invoice. The contractor may keep up to two thirds.
Described accurately, it is a $1,000 credit with a guaranteed customer discount of at least $333, and what you actually see depends on how the contractor structures it. Ask every company you are bidding to put their passthrough in writing. It is a reasonable question and the answers vary more than you would expect.
Worth noting the direction of travel: this credit was $1,500 in 2024, $1,250 in 2025 and $1,000 in 2026, and it is scheduled to step down again.
What the stack is worth
For an Xcel Energy customer inside a DRCOG-participating municipality, installing a cold climate heat pump:
| System size | Xcel | Power Ahead | State credit | Total |
|---|---|---|---|---|
| 2 ton | $4,500 | $1,500 | $1,000 | $7,000 |
| 3 ton | $6,750 | $1,500 | $1,000 | $9,250 |
| 4 ton | $9,000 | $1,500 | $1,000 | $11,500 |
These are program maximums rather than guarantees. What you actually receive depends on the certified rating of the equipment installed, your address, your utility account and the eligible project cost. We put the real number in writing before you commit to anything.
How a heat pump works
A furnace makes heat. A heat pump moves it. Everything else follows from that one difference.
It is an air conditioner that runs in both directions
Your air conditioner already moves heat. It pulls warmth out of the house and releases it outside. A heat pump is the same machine with a reversing valve added, so in winter it runs the cycle the other way: it absorbs heat from the outdoor air and releases it indoors.
The cycle in four steps:
- Refrigerant absorbs heat outdoors. Even at 5°F there is usable thermal energy in outdoor air. Refrigerant boiling at a much colder temperature picks it up.
- A compressor raises the pressure. Compressing that vapor concentrates the energy and pushes its temperature well above the air temperature inside your house.
- The indoor coil releases the heat. Your blower moves house air across it and warm air goes into the ducts.
- An expansion valve drops the pressure, the refrigerant turns cold again, and the loop repeats.
Why moving heat beats making it
Combustion has a hard ceiling. A 95% AFUE furnace turns 95% of the fuel’s energy into usable heat and loses the rest up the flue. It can never exceed 100%, because there is only so much energy in the fuel.
A heat pump is not converting fuel. It uses electricity to relocate heat that already exists, so its output is not capped by its input. In real Front Range winter conditions, a modern cold climate heat pump generally delivers somewhere between two and three and a half units of heat for every unit of electricity it draws. That ratio is called COP, and it falls as the outdoor temperature falls. In milder shoulder-season weather it runs higher.
What “cold climate” means, and why it matters more here
Older heat pumps lost most of their capacity below roughly 25°F and fell back on electric resistance heat, which is expensive. That reputation is where most of the skepticism about heat pumps in Colorado comes from, and in 1995 it was fair.
Cold climate models are a different design. Variable-capacity compressors and better refrigerant control let them hold meaningful heating capacity down near and below 0°F. A system that is not cold climate certified is the wrong equipment for the Front Range, and it also does not earn the full Xcel rebate. Those two facts happen to point the same direction.
Dual fuel, which is what most of our customers end up with
Most homes in Westminster, Broomfield, Thornton and Northglenn already have a gas furnace, and most of them keep it. The heat pump carries the large majority of the heating hours in a year and the furnace takes the coldest nights, or takes over whenever gas is the cheaper fuel at that moment. That arrangement is called dual fuel, or hybrid, and the changeover temperature is a setting we tune to your rates and your house rather than leaving at a factory default.
It is also why the Xcel rebate paperwork asks about your existing furnace efficiency and whether it is a condensing unit. The utility is modeling the same tradeoff we are.
An honest look at operating cost
Plenty of HVAC marketing says a heat pump cuts your utility bill from day one regardless of what you have now. That is not true everywhere, and we would rather explain it before you buy.
Where the savings are immediate and substantial
- You heat with electric resistance. Baseboard, an electric furnace, wall heaters. A heat pump delivers roughly two to three times the heat per kilowatt-hour. This is the largest win available in residential heating and it is not close.
- You heat with propane or oil. Common on properties off the gas main. Heat pumps generally win by a wide margin.
- You are replacing the air conditioner anyway. This is the case most homeowners overlook. If your AC is at the end of its life, a cold climate heat pump costs modestly more than a comparable new condenser, and after $7,000 to $11,500 in incentives the heat pump can land below the price of the air conditioner by itself. You get better cooling, and the heating capability comes along with it.
- You are running an 80% AFUE furnace. A fifth of the gas you buy is leaving through the flue. The gap closes quickly.
Where it is more complicated
If you have a newer condensing gas furnace at 90% AFUE or better and you are on Xcel gas service, a heat pump is not guaranteed to lower your winter heating cost. It comes down to the ratio between your electric rate and your gas rate, and that ratio is moving. Xcel has an approved electric increase in 2026 and a gas rate case pending before the Colorado Public Utilities Commission.
In practice, on a well-configured dual fuel system in a Front Range home, the heat pump wins through the shoulder seasons and hands off to gas in the deep cold. Annual heating cost usually lands somewhere between modestly lower and roughly even. Anyone promising a large guaranteed heating savings number against a modern gas furnace, without looking at your bills, is guessing.
One part is not ambiguous. Your summer cooling cost goes down, because a modern variable-capacity heat pump is a considerably more efficient air conditioner than what most Colorado homes are running today. That savings shows up on the first hot day.
Where the money actually moves
For most of our customers the financial case is not the monthly bill. It is the install. One piece of equipment covers heating and cooling, so you replace one system over the next fifteen years instead of two. Add $7,000 to $11,500 in incentives that shrink or expire on a schedule nobody in this conversation controls, and the arithmetic works today in a way it will not work forever.
Five questions worth asking any contractor
- Is the proposed equipment cold climate certified, and what is the AHRI reference number? Ask to see the certificate rather than taking the claim.
- What is the rebate amount in writing, and who submits it? Rebate assistance and rebate submission are two different services.
- How much of the state tax credit is passed through to me? One third is the legal minimum. Ask for the dollar figure.
- Are you a verified Power Ahead Colorado contractor, and will you file the pre-approval before install? The order of operations determines eligibility.
- What changeover temperature will the dual fuel system use, and can it be adjusted if rates change? That single setting drives your operating cost.
Common questions
Is there still a federal tax credit for heat pumps in 2026?
No. The federal 25C Energy Efficient Home Improvement Credit expired for equipment placed in service after December 31, 2025, and the federal HEAR rebate closed to new single-family applications in Colorado on August 1, 2026. What remains is the Xcel Energy rebate, Power Ahead Colorado and the Colorado state heat pump tax credit.
How much can a Colorado homeowner save on a heat pump in 2026?
An Xcel Energy customer in a DRCOG-participating municipality installing a cold climate heat pump can stack roughly $7,000 on a 2-ton system, $9,250 on a 3-ton system and $11,500 on a 4-ton system. The actual figure depends on the certified equipment rating, your address, your utility account and the eligible project cost.
Do heat pumps work in Colorado winters?
Cold climate certified heat pumps do. They are rated to hold meaningful heating capacity near and below 0°F, and most Front Range installations keep the existing gas furnace as backup in a dual fuel setup for the coldest nights.
Do I have to be an Xcel customer to get the rebate?
For the Xcel rebate, yes, but either service counts: residential electric or natural gas service from Xcel Energy in Colorado will qualify you, including split households with a co-op for electricity and Xcel for gas. The narrower requirement is the equipment, since the program is aimed at replacing gas heating. The Colorado state tax credit and Power Ahead Colorado have no utility requirement, though Power Ahead is limited to participating municipalities.
Will a heat pump lower my gas bill?
It will lower your gas usage substantially, because the heat pump handles most of the heating hours. Whether your total utility spend drops depends on the ratio between your electric and gas rates and on how efficient your current furnace is. Replacing electric resistance, propane, oil or an 80% AFUE furnace saves money right away. Replacing a modern 95% condensing furnace on Xcel gas is closer to even on heating, with clear savings on summer cooling.
How long does the Xcel rebate take to arrive?
Processing has been running longer than it used to. Plan on a couple of months from a complete submission, and understand that an incomplete packet is the most common reason a rebate sits. That is the main argument for having the installing contractor file it.
Get the real number for your house
Rebate programs change. Amounts step down, funding runs out, and deadlines arrive with little notice. Three of the six programs on this page closed within the last eighteen months. The stack available right now is the largest one Colorado homeowners are likely to see, and none of it is scheduled to grow.
GoodFellas installs cold climate heat pumps across the north Denver metro and Boulder County, including Northglenn, Thornton, Westminster, Broomfield, Arvada, Longmont, Boulder, Brighton, Erie, Lafayette, Louisville, Superior, Wheat Ridge and Commerce City. We handle the Xcel submission, the AHRI documentation and the commissioning paperwork so the rebate actually lands.
Call (303) 457-4328 or request an estimate. We will size the system, confirm which programs your address qualifies for, and put the net number in writing, including the cases where we tell you a heat pump is not your best move.
Rebate and tax credit information is current as of August 2026 and is subject to change by Xcel Energy, DRCOG and the State of Colorado. This article is general information rather than tax advice. Talk to your tax professional about your situation.
