Short answer: the federal heat pump tax credit is gone for anything installed in 2026. The 25C credit (heat pumps, heat pump water heaters, panels, insulation) does not apply to property placed in service after December 31, 2025. The 25D credit (geothermal, solar, batteries) does not apply to installations completed after that date. Both changes came from Public Law 119-21, signed July 4, 2025.
If your system went in during 2025, you can still claim it on your 2025 return. If it goes in now, the money in Colorado comes from your utility, the state credit and, in the Denver metro, Power Ahead Colorado.
What exactly ended
25C, the Energy Efficient Home Improvement Credit. In 2025 it paid 30% of cost, up to $2,000 a year for heat pumps, heat pump water heaters and biomass stoves, plus up to $1,200 a year for other items. That $1,200 included up to $600 for an electrical panel and $150 for a home energy audit. The IRS FAQ says the credit "will not be allowed for any property placed in service after December 31, 2025."
The test is when the equipment was placed in service, not when you paid. A deposit or signed contract in 2025 does not save a 2026 install. The IRS FAQ says the binding-contract rule written for vehicle credits does not extend to 25C.
25D, the Residential Clean Energy Credit. This covered geothermal heat pumps, solar, batteries and similar equipment at 30%. The IRS says it is not allowed for expenditures made after December 31, 2025, and an expenditure is treated as made when the original installation is complete. Unused credit from earlier years can still be carried forward.
30C, home EV chargers. This credit ends for property placed in service after June 30, 2026. It only ever applied in eligible low-income or non-urban census tracts, up to $1,000 per item.
If your system was installed in 2025
You can still claim 25C on your 2025 return:
- Get the manufacturer's certification statement and the qualified manufacturer identification number. Starting in 2025, the IRS requires that number for each item.
- Fill in Form 5695 Part II. Heat pumps and heat pump water heaters share a $2,000 annual cap at 30% of cost.
- If you already filed without it, talk to a tax preparer about an amended return.
We can't give tax advice. The IRS pages linked below are the authority.
Why so much content still says "30% federal credit"
Many pages were written in 2023 and 2024 and were never updated. Searches for "heat pump tax credit 2026" are rising, mostly from people who haven't heard it ended. If a quote, ad or website in late 2026 subtracts a federal credit from your price, ask the seller to show you the IRS rule they are relying on.
What's left in Colorado
The stack after the federal credit looks like this. Details and status for each are in our 2026 rebate guide.
- Your utility. Xcel Energy pays $750 per heating ton at 5°F for cold-climate heat pumps, or $1,500 with the bonus for homes heated with Xcel gas, as of October 1, 2026. Municipal utilities and co-ops have their own programs.
- The Colorado heat pump tax credit. Your contractor claims it and passes at least a third to you on the invoice. Up to $1,000 for air-source in 2026 ($2,000 ground-source, $250 heat pump water heaters), per the Colorado Energy Office.
- Power Ahead Colorado. $1,500 per cold-climate heat pump system in DRCOG member communities, with contractor preapproval before work starts. See Power Ahead explained.
- Local and income-qualified programs. Boulder County EnergySmart, Holy Cross Energy's income-qualified tier and others.
The 2026 state amount may be lower
Colorado's credit has a trigger that halves it when the June revenue forecast shows growth under 4%, and the 2025 forecast tripped it. HB26-1289, signed June 3, 2026, removes the halving after tax year 2026; its fiscal note says 2026 credits are halved, while the Colorado Energy Office page still shows the full amounts. Ask your contractor which amount they are passing through.
One more thing that is gone: the state sales tax exemption on heat pumps. The Department of Revenue says it expired on December 31, 2023.
What this means for timing
There is no federal deadline left to chase. The deadlines that matter now are local:
- Xcel's 2026 rebates need the install and invoice done by December 31, 2026. Xcel takes applications until September 30, 2027.
- The state credit's air-source amount is set by statute at $1,000 for 2026 through 2028, then $500 for 2029 through 2032. The 2026 amount may be lower, as above.
- Power Ahead's funding runs through September 2029 or until its budget is used.
If your furnace is working, there's no federal reason to rush. If it's failing, the Colorado stack is still worth getting right; see what a heat pump really costs.