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Water Heater Rebates & Incentives
Upgrading to a heat pump water heater or high-efficiency gas water heater can qualify you for significant federal tax credits and utility rebates. Water heating accounts for roughly 20% of home energy use, so an efficient unit pays for itself over time.
Federal programs for Water Heaters
25C Energy Efficient Home Improvement Credit
Up to $2,000 per year for qualifying heat pump water heaters. Covers 30% of equipment and installation costs.
Eligibility: Existing homes only. The water heater must meet specific energy efficiency requirements (typically ENERGY STAR certified).
HOMES / HEAR Rebates (IRA §50121–50122)
Income-qualified households may receive up to $1,750 in point-of-sale rebates for heat pump water heaters.
Eligibility: Low- and moderate-income households. State-administered — check local availability.
Find local Water Heaters rebates
Enter your ZIP code to discover state, utility, and local rebates available in your area.
Frequently asked questions
Which water heaters qualify for the federal tax credit?
Heat pump water heaters (hybrid water heaters) that meet ENERGY STAR requirements qualify for the full $2,000 annual credit. Some high-efficiency gas water heaters qualify for up to $600.
How much does a heat pump water heater cost?
Typical installed costs range from $2,500 to $4,500. After federal tax credits and any state/utility rebates, your net cost could be $1,000–$2,500 or less.
Can I claim both the federal credit and a utility rebate?
Yes. The federal tax credit and utility or state rebates are independent programs. You can stack them to maximize your savings.
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