Here is a summary of how all of these incentives add up for homes in Colorado.
Federal Tax Credit for Heat Pumps and Heat Pump Water Heaters
Under the Inflation Reduction Act (IRA), heat pumps and heat pump water heaters (HPWHs) are eligible for a 30% tax credit, beginning in tax year 2023, up to a limit of $2,000 per taxpayer. In addition, home energy efficiency improvements are eligible for a 30% tax credit up to $1,200.
To qualify for the tax credits, HPWHs must be ENERGY STAR-certified, and heat pumps must meet the following minimum efficiency requirements:
For Northern States (including Colorado, Utah, Wyoming):
- Must meet the min. HSPF and SEER ratings as shown below:
Type of HP system |
SEER/SEER2 |
HSPF/HSPF2 |
|---|---|---|
| Ducted | 16.0/15.2 | 9.5/8.1 |
| Ductless | 16.8/16.0 | 10.6/9.5 |
- Must have a capacity ratio of >58% at 17 degrees F, relative to the capacity at 47 degrees F.
- Must have a coefficient of performance (COP) at 5 degrees F of at least 1.75
The Consortium for Energy Efficiency (CEE) has a list of heat pumps that meet these minimum requirements here. Because of the capacity and COP requirements, most heat pumps on the CEE list are also cold-climate heat pumps, and therefore they tend to be more expensive than non-cold climate heat pumps that meet ENERGY STAR’s minimum efficiency criteria.
