Colorado Energy Tax Credits: Types, Filing, and Expiration

Colorado energy tax credits in 2026 include a heat pump credit delivered as a contractor discount, a 10% residential battery storage credit, a reduced electric vehicle credit, and two competitive refundable programs for industrial emissions cuts and geothermal electricity. Every major federal energy credit was terminated for property placed in service in 2026, so these state credits now carry the full load.

Heat Pump Credit

You don’t file this one. A contractor registered with the Colorado Energy Office installs the system, claims the credit on their own return, and must pass at least one-third of it back to you as an upfront discount on the installation.

For systems installed on or after January 1, 2026, the credit and the minimum customer discount are:

  • Air-source heat pump: $1,000 credit, minimum $333 discount
  • Ground-source, water-source, or combined-source heat pump: $2,000 credit, minimum $667 discount
  • Heat pump water heater: $250 credit, minimum $83 discount

Heat pumps used for space heating and cooling must be designed to meet at least 80% of the home’s annual heating needs, and the equipment must be Energy Star certified. The contractor’s invoice has to show the discount as a separate line item labeled “State of Colorado Heat Pump Discount.”1Colorado Energy Office. Colorado Heat Pump Tax Credits

Your only job as the homeowner is to use a registered contractor and keep that invoice. The contractor submits Form DR 1322 to the Department of Revenue.2Colorado Department of Revenue. DR 1322 – Heat Pump Tax Credit Schedule Credit amounts are scheduled to decrease again in 2029.

Residential Energy Storage System Credit

If you install a qualifying battery or other energy storage system at a Colorado residence, you can claim 10% of the system’s purchase price.3Justia Law. Colorado Revised Statutes 39-22-546 You claim this one yourself by completing Form DR 1307 and attaching it to your Colorado return.4Colorado Department of Revenue. Residential Energy Storage System Credit Eligibility Certification and Assignment Election

The credit is non-refundable, and you cannot carry unused amounts forward. If the credit exceeds your Colorado tax liability, the extra is lost. One workaround: you can assign the credit to a third party such as your installer or financing company using the same DR 1307. When assigned, any amount above the assignee’s tax liability is refunded to them, which often translates into a larger upfront discount for you.5Colorado Department of Revenue. DR 1307 – Residential Energy Storage System Credit Eligibility Certification and Assignment Election Instructions The credit is available through tax year 2027 and repeals on January 1, 2028.3Justia Law. Colorado Revised Statutes 39-22-546

Innovative Motor Vehicle Credit

Colorado offers a state credit for buying or leasing a new electric or plug-in hybrid vehicle. Individuals, estates, trusts, and C corporations can all claim it. The vehicle’s manufacturer’s suggested retail price must be $80,000 or less, and leases must run at least two years.6Department of Revenue – Taxation. Income Tax Topics – Innovative Motor Vehicle Credit

For tax year 2026, the base credit is $750 for both purchases and leases. That’s a sharp cut from the $5,000 available in earlier years, triggered automatically when state revenue growth is forecast below 4%.7FindLaw. Colorado Revised Statutes Title 39 Taxation 39-22-516.7

The bigger piece in 2026 is a $2,500 bonus credit for vehicles with an MSRP under $35,000, which stacks on the base amount for a total state credit of $3,250 on an affordable EV. The bonus runs through the end of 2028. Some dealers will apply the credit at the point of sale through assignment, but the extra $600 that used to come with assigning the credit to a dealer expired at the end of 2025. Credit amounts for 2027 and 2028 will depend on future revenue forecasts.6Department of Revenue – Taxation. Income Tax Topics – Innovative Motor Vehicle Credit

Industrial Clean Energy Credit (CITCO)

The Colorado Industrial Tax Credit Offering gives refundable credits to industrial facility owners for cutting greenhouse gas emissions. It covers two kinds of spending: an emissions study to identify the best improvements, and the capital work to implement them.

The base credit is 30% of qualifying costs. The Colorado Energy Office can bump that to 50% case by case for projects using technologies that aren’t yet commercially mature but show strong emissions-reduction potential. Study credits are capped at $1 million. Capital improvement credits range from a minimum of $75,000 to a maximum of $8 million per project.8FindLaw. Colorado Revised Statutes Title 39 Taxation 39-22-551 – Industrial Clean Energy Tax Credit

Total funding is $168 million, awarded through semi-annual application periods managed by the Colorado Energy Office. Through mid-2028, up to $8 million can be reserved per period; after that, $12 million per period through mid-2032. Unused allocation rolls into the next cycle. Because the credit is refundable, the state pays out any amount above your tax liability.9Colorado Energy Office. Colorado Industrial Tax Credit Offering

Geothermal Energy Credit (GETCO)

GETCO funds geothermal electricity projects through two refundable credits, both competitive. The investment credit covers up to 30% of eligible exploration and development costs, capped at $5 million per project, with the Energy Office able to raise the percentage to 50% for projects that significantly advance geothermal electricity in Colorado. A total of $35 million in investment credits is available through 2032.

The production credit pays $0.02 per kilowatt-hour generated, and the Energy Office can adjust the rate annually. Applications close June 30 and December 31 each year, though the Energy Office is not currently accepting them. The program ends when funding runs out or on December 31, 2032, whichever comes first.10Colorado Energy Office. Colorado Geothermal Energy Tax Credit Offering

Federal Energy Credits No Longer Available

Before you plan around a federal credit you may have read about, know this: under the One Big Beautiful Bill (Public Law 119-21), signed in July 2025, every major federal energy credit for consumers has ended.

  • Energy Efficient Home Improvement Credit (Section 25C), which covered heat pumps, insulation, windows, and similar upgrades: not available for property placed in service after December 31, 2025.
  • Residential Clean Energy Credit (Section 25D), which covered solar panels, battery storage, and geothermal heat pumps: not available for expenditures made after December 31, 2025.
  • New Clean Vehicle Credit (Section 30D): not available for vehicles acquired after September 30, 2025.
  • Commercial Clean Vehicle Credit (Section 45W): not available for vehicles acquired after September 30, 2025.

If you installed a heat pump or bought an EV before those cutoff dates, you can still claim the federal credit on your 2025 return. For Section 30D specifically, a written binding contract and payment by September 30, 2025 preserve the credit even if delivery came later.11Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under Public Law 119-21 For anything new in 2026, the Colorado credits above are the only tax-based savings.

How to File and What to Keep

Colorado energy credits are claimed on your annual state income tax return. Individuals file Form DR 0104 and attach the Individual Credit Schedule, DR 0104CR, which has dedicated lines for each credit. Businesses use Form DR 0112 and the corporate credit schedule.12Department of Revenue – Taxation. DR 0104 – Individual Income Tax Return

Documentation differs by credit:

When Each Credit Expires

Several of these programs are winding down, and missing a deadline or applying after funding runs out means losing the credit.

Before you commit to a project counting on a credit, check the Colorado Energy Office website for current application status. CITCO and GETCO are competitive, and the geothermal program is not always open for applications.