Clean Hydrogen Tax Credit
Clean Hydrogen Tax Credit
Tax credits for Coloradans who use clean hydrogen to reduce emissions.
Funding Overview
Type: Refundable tax credit
Eligibility: Users of clean hydrogen in hard-to-decarbonize sectors
Amount: Up to $1,000,000 per taxpayer per year in 2025. The maximum amount will decrease in 2026 and again in 2029.
Program length: Through 2032
Timeline: To be determined. See Program Status.
Background
The Clean Hydrogen Tax Credit is a refundable tax credit available to eligible taxpayers who use clean hydrogen to reduce emissions in hard-to-decarbonize sectors, such as industry, aviation, and heavy-duty transportation. This tax credit is intended to encourage the adoption of low-carbon hydrogen technologies as part of Colorado’s broader climate and energy goals.
What is a refundable tax credit? A refundable tax credit is a credit you can receive as a refund or repayment on your taxes if the credit amount is more than the amount of taxes you owe.
For more information on this tax credit, please contact quinn.antus@state.co.us.
Eligibility
To be eligible for Colorado's clean hydrogen tax credit, the hydrogen must be used for a qualified use and meet specific greenhouse gas (GHG) emissions standards, as outlined in the “Advance The Use Of Clean Hydrogen” bill.
Qualified Uses
The clean hydrogen tax credit is available for hard-to-decarbonize end uses. These include:
- Heavy-Duty Transportation: Use of clean hydrogen in heavy-duty vehicles, such as trucks and buses.
- Aviation: Use of clean hydrogen as a fuel source in aviation.
- Industrial Heat: Use of clean hydrogen for industrial heating processes requiring temperatures of at least 150°C.
- Industrial Feedstock: Use of clean hydrogen as a feedstock in industrial processes, including the production of steel, ammonia, fertilizers, and chemicals.
Note: The direct use of hydrogen for residential or commercial heating is not eligible for this tax credit.
Emission Standards and Tax Credit Amounts
Emissions standards are defined in terms of "Tier One" and "Tier Two" lifecycle GHG emissions rates, which align with federal guidelines. The following tax credit amounts are available for qualified uses in each tier. An eligible taxpayer may claim up to $1 million in tax credits in 2025, up to $500,000 per year in 2026–2028, and up to $250,000 per year in 2029–2032.
| Tier | Lifecycle GHG emissions rates | Tax Credit Amount (up to annual cap) |
|---|---|---|
| Tier One | Less than 0.45 kg CO2e per kg of hydrogen | $1.00/kg of clean hydrogen used |
| Tier Two | 0.45 - 1.5 kg CO2e per kg of hydrogen | $0.33/kg of clean hydrogen used |
Applicants must provide verification from the hydrogen producer at the point of sale confirming that the hydrogen meets these requirements.
Program Status
The Colorado Energy Office may not issue certificates until the Colorado Public Utilities Commission (PUC) finalizes lifecycle greenhouse gas emissions accounting rules. These rules are expected to align with Section 45V Clean Hydrogen Production Tax Credit federal guidance where possible, as well as Colorado statutory requirements set out in HB23-1281 and 40-2-138(3) C.R.S. The PUC is expected to release a notice of proposed rulemaking before the end of 2025.
We will continue working with the PUC and will update this page as soon as rules are finalized and applications open.