Federal Tax Credits Expired. What Colorado Homeowners Need to Know.
March 24, 2026 · 4 min read
What Expired
The federal Section 25C (Energy Efficient Home Improvement Credit) ended December 31, 2025. It covered heat pumps, insulation, heat pump water heaters, and certain windows and doors. The credit was worth up to $3,200 per year, with a $2,000 sub-cap for heat pumps.
The Section 25D (Residential Clean Energy Credit) also ended at the same time. That credit applied to solar panel installations, home battery storage, geothermal, and fuel cells. It was worth 30% of the installed cost with no dollar cap.
Both credits were terminated by the One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025). Homeowners who completed qualifying work before December 31, 2025 can still claim the credit on their 2025 federal tax return, due April 15, 2026.
What Still Works in 2026
State, federal rebate, and utility programs are fully active and, in many cases, more valuable than the federal tax credits were. HEAR and HOMES rebates are federally funded through IRA allocations to states -- they are a different legal mechanism from the expired tax credits and remain available.
HEAR Program (Income-Qualified)
The HEAR (Home Electrification and Appliance Rebates, IRA Section 50122) program provides point-of-sale rebates -- the discount comes off the contractor invoice directly. Federal maximums (state programs may vary):
- Up to $8,000 for heat pump installations (under 80% AMI)
- Up to $1,750 for heat pump water heaters
- Up to $4,000 for electrical panel upgrades (with heat pump install)
- Up to $1,600 for insulation
Income limits apply: households up to 80% of area median income qualify for the maximum rebates. Households between 80-150% AMI qualify for partial amounts. HEAR cannot be combined with other federal rebates for the same upgrade, but CAN stack with state tax credits and utility rebates.
Xcel Energy Rebates
Xcel Energy offers rebates up to $6,750 on qualifying cold-climate heat pump systems for its Colorado customers ($2,250 per heating ton). The contractor submits the application after installation. No income requirement applies.
Colorado State Heat Pump Tax Credit
Colorado maintains a state-level tax credit of up to $1,000 for heat pump installations in 2026, administered as an on-invoice discount through registered contractors. Contractors may retain up to two-thirds of the credit value, so the minimum discount you will see is approximately $333. Some contractors voluntarily pass through the full amount. The credit has been phasing down: $1,500 in 2024, $1,250 in 2025, $1,000 in 2026.
Power Ahead Colorado (NEW -- April 2026)
The Power Ahead Colorado program, funded through DRCOG (Denver Regional Council of Governments), offers a $1,500 rebate for cold-climate heat pump installations in the Denver metro area. No income limits apply. Note: Power Ahead does NOT stack with HEAR (both are federally funded), but it does stack with the Xcel utility rebate and the Colorado state tax credit.
Bottom Line
When all three programs are open, a Denver-area heat pump install can combine up to $15,750 from HEAR, Xcel Energy, and the Colorado state tax credit. That exceeds what the federal 25C credit was worth for most households, and the key difference is that most of these programs reduce the upfront cost directly rather than requiring a tax filing, making them accessible regardless of tax liability.
One current caveat: Colorado HEAR stopped accepting new Front Range (Region 1, including Denver) applications on April 28, 2026. Until it reopens, a new Denver install can count on the Xcel rebate and the state credit ($7,750), with the full $8,000 HEAR still open in Region 2 (mountain and Western Slope counties). Confirm current status for your address before you install.
Use the WattGap tool to see which programs apply to your address and income level. Results take about 60 seconds.
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