Denver couple, $85k household, replacing a dying 15-year-old furnace with a cold-climate heat pump

What follows is not a real customer story. It's a worked example, built from the same rebate data, program rules, and cost ranges the calculator uses. I put it together to show what the whole process actually looks like when the rebate stack, the contractor conversation, and the payback math have to come together in one project. Names, addresses, and specifics are illustrative.

If you're in Colorado with a similar setup, your actual quote and rebate math will vary — but the shape of the decision is representative of what most middle-income Colorado households doing a full-home heat pump swap in 2026 will face.

Alex and Jordan bought their Denver bungalow in 2019. In February 2026, the furnace's blower motor started making the sound blower motors make right before they go: a low rumble that turns into a grinding noise if you're within earshot for more than five minutes. Their HVAC tech gave them the short version: the whole system is at end of life, they should plan on replacing it in the next twelve months, and they can either replace-in-kind (new gas furnace + new AC, roughly $9,000–$11,000 installed) or replace with a heat pump.

Both of them had heard heat pumps mentioned in the context of the IRA rebates. Neither had spent time understanding the tradeoffs. That's where they started their research — and where this scenario picks up.

Their household income is $85,000. In Colorado, the four-person state median income is around $116,800 (2024–2025 HUD data). Adjusting for a two-person household using HUD's factor of 0.80, that's an effective median of $93,440. Their $85,000 income divided by that median = ~91% AMI.

That puts them in the HEAR "moderate" tier: 80–150% AMI. Under HEAR, they qualify for 50% of the heat pump project cost up to the $8,000 program cap.

If their income had been $70,000 instead of $85,000, they'd have landed at ~75% AMI, in the "low" tier — 100% of project cost up to the cap. On a $17,000 install, that would have meant the full $8,000 rebate versus 50% of $17,000 (which is $8,500 → still capped at $8,000). In their case, the math works out similarly at the cap, but for a smaller install ($10,000, say), the tier difference would matter a lot: $10,000 fully covered vs. $5,000.

Point being: the AMI tier is the first thing to check, and it drives everything else.

Alex and Jordan got three quotes.

Contractor #1 was their existing HVAC company — the one who diagnosed the failing furnace. When they asked about heat pumps, the tech said heat pumps "don't really work in Colorado winters," and suggested a new 96% AFUE gas furnace with a matched AC ($10,200). This is a common answer from HVAC companies that built their business on gas equipment. It's not wrong that some heat pumps struggle in cold weather. It is wrong that cold-climate heat pumps struggle in Colorado. They moved on.

Contractor #2 was on Colorado's HEAR-registered contractor list. They proposed a Mitsubishi Hyper-Heat cold-climate heat pump (SEER2 20.5, HSPF2 10.5, rated to 5°F with continued useful heating output to -13°F). System cost: $18,500 including new line-set, condensate drain, thermostat, and permit. They kept the existing gas furnace as backup for extreme cold — a "dual-fuel" configuration. This is common in Colorado because most homes already have a gas furnace and losing it entirely means either bigger electric backup or a full panel review.

Contractor #3 proposed an all-electric conversion: same Mitsubishi CCHP but no gas backup, with a 10 kW electric resistance strip as auxiliary. System cost: $17,000 for the HVAC portion, but they also flagged that the existing 100A panel would probably not accommodate the strip on top of the household's other loads, so add $3,200 for a panel upgrade. Total: $20,200.

They chose Contractor #2. The dual-fuel configuration meant no panel upgrade, and the Colorado climate rarely stays below -5°F long enough for the gas backup to run more than a few hours per year in a well-insulated home.

Project cost: $18,500 installed.

• Federal HEAR (Colorado): As of May 2026, Colorado HEAR is open. At 91% AMI, they qualify for 50% of project cost, capped at $8,000. 50% of $18,500 = $9,250 → capped at $8,000. Rebate: $8,000.
• Colorado state heat pump tax credit: $1,500 state income tax credit, not income-gated. Stacks with HEAR (applies to their share of cost after HEAR). Rebate: $1,500.
• Xcel Energy CO Cold Climate Heat Pump rebate: Their Mitsubishi Hyper-Heat qualifies for the top tier. Rebate: $1,500.
• Federal 25C credit: Expired December 31, 2025. Not available. Contractor #2's initial quote had a "federal tax credit" line — Alex noticed and asked. Contractor confirmed it was leftover template text from 2024 and removed it.

Total stacked rebates: $11,000. Net cost: $7,500.

Some practical details on how the install actually went.

Weeks 1–2: Getting quotes. Two of the three contractors could do a proper Manual J load calculation on the spot; the third needed a follow-up visit.

Week 3: Signed contract with Contractor #2. Contractor submitted the HEAR pre-approval on Alex and Jordan's behalf — this is required before install. Approval took 9 business days.

Week 5: HEAR pre-approval came back. Install scheduled for the following week.

Week 6: Two-day install. Contractor removed the existing AC condenser and installed the outdoor heat pump unit. Kept the existing gas furnace and connected the heat pump to a two-stage thermostat that switches between heat pump (primary) and gas (auxiliary below 15°F).

Week 6, end of install: HEAR rebate was applied at the invoice as a $8,000 discount. Alex and Jordan paid $10,500 out of pocket.

Week 7: Xcel Energy rebate application submitted online. Xcel took 4 weeks to process; check for $1,500 arrived in July 2026.

Tax time (Q1 2027): Alex and Jordan will claim the $1,500 Colorado state heat pump tax credit on their 2026 Colorado state return.

The most honest question about a heat pump project isn't "did I save money" — it's "how did this compare to the alternative I would have chosen." For Alex and Jordan, the alternative was Contractor #1's proposal: a $10,200 new gas furnace + AC combo.

Here's the 10-year comparison, rough numbers, Denver climate and rates:

• Gas furnace + AC replacement: $10,200 upfront. Annual heating cost ~$700 (natural gas at Colorado rates), annual cooling ~$300 (electricity), total ~$1,000/year. 10-year total: $20,200.
• Heat pump conversion (their choice): $7,500 net upfront (after all rebates). Annual heating ~$650 (heat pump on Colorado electric rates, with 20 hours/year on gas backup during cold snaps), annual cooling ~$280 (better efficiency vs old AC), total ~$930/year. 10-year total: $16,800.

Difference over 10 years: about $3,400 in favor of the heat pump. Simple payback vs the gas-swap alternative: about 3 years.

This is dramatically better than what would have shown up if we did the payback math against "do nothing," where they'd have kept the failing furnace and had a much lower baseline cost. But nobody keeps a failing furnace for 10 years. The right comparison is heat pump vs. the alternative you'd actually choose — and in this case, the heat pump won even without accounting for the CO2 reduction or the future-proofing against gas rate volatility.

Several things about this scenario tilted the math favorably. If any of them had been different, the answer might have been closer or negative.

• The existing panel was 200A. Panel upgrade would have added $2,500–$4,000. No rebate for panel work in this specific case because they didn't do it.
• The ductwork was in reasonable condition. If it had been in the attic and leaky, the contractor would have quoted an extra $3,000–$5,000 for duct sealing or replacement.
• They lived in Xcel territory. If they'd been in a smaller electric coop area without a heat pump rebate, they'd have lost $1,500 from the stack.
• Their AMI was 91%. If they'd been at 155% AMI (above the HEAR ceiling), the $8,000 HEAR rebate would have been $0, and the net cost would have been $15,500 instead of $7,500. Payback would have stretched to 15+ years — technically the equipment lifetime, but very marginal economics.
• Colorado's HEAR was open. If they'd been in a state where HEAR is still launching (Texas, Pennsylvania, Illinois, several others), they'd have been looking at just the state credit + utility rebate — total $3,000 instead of $11,000.

Point being: the same equipment, same install, same household in a different state or a different income bracket could easily end up with 12-year payback instead of 3. That's why the calculator surfaces the specific stack for your specific ZIP and income, rather than one universal answer.

Distilling from what a lot of similar households report after doing this project:

• Get quotes from HEAR-registered contractors first. A non-registered HVAC company can't submit the rebate application. That means quotes from non-registered contractors need to have the HEAR rebate mentally subtracted from your comparison, which most households forget to do.
• Ask about the Manual J. A proper load calculation is the difference between a right-sized heat pump and an oversized (or undersized) heat pump. Both extremes lead to comfort and cost problems. Contractors who won't do a Manual J are cutting a corner that matters.
• Timing the install with existing equipment failure is the right move. Replacing working equipment early rarely pencils. Waiting for the existing furnace or AC to actually fail — while doing the research and getting quotes in advance — is the sweet spot.
• Utility rebate applications are separate from HEAR. The HEAR rebate is applied at install by the contractor. The utility rebate is a separate application by the homeowner, submitted after install with proof of purchase. Both stack, but they involve two different paperwork trails.