For Tax Year 2023 only, Colorado allows an income tax credit to building owners who install certain types of heat pump systems or heat pump water heaters into residential or commercial buildings in Colorado. Colorado also allows a state sales tax exemption for purchases of heat pump systems and heat pump water heaters. This form DR 1322 must be used for both the income tax credit and the state sales tax exemption. For purposes of this form, the term “building owners” includes lessees who purchase a qualifying heat pump system or heat pump water heater and install it into a building in Colorado with the lessor’s approval. Building owners must use this form to certify that all required conditions for claiming the income tax credit and the sales tax exemption have been met.
When claiming the income tax credit, this form must be filed with the building owner’s Colorado income tax return unless the credit is assigned. If the credit is assigned, the amount of the credit allowed that exceeds the assignee’s income tax due is refunded to the assignee. However, if the credit is not assigned, the amount of the credit that exceeds the building owner’s income tax due is not refunded to the building owner and may not be carried forward to any future years’ income tax due.
Information on heat pump installations made in 2024 can be found on the Colorado Energy Office's website.