Water Heaters (Natural Gas) Tax Credit

Information updated 12/30/2022

This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.

See tax credits for 2022 and previous years.

You can claim:

30%
of project cost
$600
maximum amount
credited

What products are eligible?

Gas storage water heaters

ENERGY STAR certified models are eligible as follows: > 0.81 UEF for tanks less than 55 gallons and > 0.86 UEF for tanks greater than or equal to 55 gallons.

Tankless gas water heaters

ENERGY STAR models with > 0.95 UEF are eligible. 

Annual Limits on Energy Efficient Home Improvement Tax Credits

In addition to limits on the amount of credit you can claim for any particular equipment installation or home improvement, there are annual aggregate limits.  The overall total limit for an efficiency tax credit in one year is $3,200.  This breaks down to a total limit of $1,200 for any combination of home envelope improvements (windows/doors/skylights, insulation, electrical) plus furnaces, boilers and central air conditioners.  Any combination of heat pumps, heat pump water heaters and biomass stoves/boilers are subject to an annual total limit of $2,000. (Note: ENERGY STAR certified geothermal heat pumps are eligible for a separate tax credit and not counted against these limits.)

ENERGY STAR logo

Find Eligible Products

Find products that are eligible
for this tax credit.

ask the experts

Your go-to resource for the latest
advice from ENERGY STAR
experts on saving energy at
home and work.

Home Upgrade Tool Logo

ENERGY STAR Home Upgrade

Water heater upgrades
qualify for this tax credit.

Rebate Finder - new

Rebate Finder Icon

Rebate Finder

Our partners sponsor rebates
on certified products.

Who can use this credit?

Principal Residence Owners

Must be an existing home & your principal residence. New construction and rentals do not apply.

A principal residence is the home where you live most of the time. The home must be in the United States. It can include a house, houseboat, mobile home, cooperative apartment, condominium, and a manufactured home.

How can I maximize my tax credits?

Given the way the annual aggregate limits are structured, it may be prudent to spread your improvements over a few years.   If your heating or cooling system is old, and you are considering a new air source heat pump, it is always wise to optimize your attic insulation first, so you don’t pay for more heating and cooling than you actually need.  Making these upgrades together in one year would allow you a tax credit of up to $1,200 for the insulation and up to $2,000 for the heat pump. Similarly, you could combine a heat pump installation with window/door replacements.  In that scenario, the $2,000 credit for the heat pump could be combined with tax credits up to $600 total for the windows/skylights plus $500 for two or more doors. If you replace your water heater the following year, you would be eligible for another 30% tax credit, up to $2,000 plus up to $600 if you need an electric panel upgrade to accommodate the new water heater.