Government Offers Tax Credit for New Heat Pump Water Heaters: Receive up to 30% of Total Cost Back

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Energy Efficiency Grants for Homes

The Biden administration and the EPA have announced a new set of grants focused on enhancing energy efficiency in residential homes. One of the key grants is the Heat Pump Water Heaters Tax Credit, offering up to 30% reimbursement on the total cost of installation. This article outlines how to access this public subsidy and the essential requirements for eligibility.

New Tax Credit for Heat Pump Water Heaters

Heat pump water heaters represent a more energy-efficient option compared to traditional storage tank water heaters. By utilizing electricity to extract heat from the air and transfer it into the water, they are significantly more efficient than standard electric water heaters.

The recent enactment of a federal tax credit covers 30% of the total cost (up to $1000) for installing an ENERGY STAR certified heat pump water heater. This financial incentive is ideal for homeowners seeking to upgrade to this environmentally friendly appliance.

Government’s Explanation of the Tax Credit

The Inflation Reduction Act, recently passed by the government, includes a new tax credit for homeowners installing an ENERGY STAR certified heat pump water heater. This credit covers 30% of the total cost of the water heater and installation, capped at $2,000.

  • Must be ENERGY STAR certified
  • Energy factor of at least 2.0 for standard size units (55 gallons or less)
  • Energy factor of at least 2.2 for large units (over 55 gallons)

Enacted as part of the Inflation Reduction Act, this tax credit aims to boost energy efficiency and reduce inflation through investments in domestic energy production. By taking advantage of this incentive, homeowners can make heat pump water heaters more affordable and cut down on water heating costs significantly.

Eligibility and Requirements

The tax credit is available to homeowners who install a qualifying heat pump water heater in their primary or secondary residence. Both itemizers and non-itemizers can claim the credit. For new constructions, the water heater must be clearly distinguished in the documentation.

To qualify, homeowners must purchase and install an ENERGY STAR certified heat pump water heater between January 1, 2023, and December 31, 2032. The system should serve as the primary source of water heating in the home, with rental properties not being eligible.

The tax credit can be claimed once per tax return, meaning that married couples filing jointly can claim a single credit. The maximum credit applies per residence, preventing multiple claims for installing units in multiple homes. Both existing and new homes are eligible for the credit.

Covering 30% of the total system cost, including the unit, labor, and additional parts, the tax credit has no maximum limit. Opting for higher efficiency and larger capacity units may result in a higher incentive.


The Heat Pump Water Heaters Tax Credit offers a straightforward way for homeowners to benefit from a public subsidy aimed at reducing the carbon footprint in residential buildings. This credit aligns with other sustainable initiatives and presents an excellent opportunity for homeowners to make environmentally friendly upgrades to their homes.

Read More of this Story at – 2024-04-07 11:00:28

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