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Hot Savings and Tax Credits with ENERGY STAR Certified Water Heaters

By Steve Ryan, U.S. EPA ENERGY STAR

In the market for a new water heater? Receive a $300 federal tax credit when you buy an energy efficient, ENERGY STAR certified electric heat pump or gas storage water heater.

ENERGY STAR certified electric heat pump water heaters (HPWH)

All HPWHs that earn the ENERGY STAR are independently certified and qualify for the federal tax credit. The innovative technology these water heaters use can save a family of four thousands in energy savings over the life of the unit. Many certified units provide ancillary benefits, including space conditioning (dehumidification) and Wi-Fi connectivity. For more information on certified heat pump water heaters, click here.  

How much can I save?

A family of four can save $3,500 over a HPWH’s lifetime, or $330 per year. 

Table 1. Savings and Paybacks for HPWHs

Household Size

Annual  kwh Savings

Annual  $ Savings

Payback (Years)

Lifetime Savings

2

            1,350

 $          170

             4.8

 $             1,360

3

            2,020

 $          250

             3.2

 $             2,430

4

            2,690

 $          330

             2.4

 $             3,510

5

            3,370

 $          410

             1.9

 $             4,590

6

            4,040

 $          500

             1.6

 $             5,670

Assumes: 12 cents/kWh; Incremental Cost = $800; 13 - year lifespan

ENERGY STAR certified gas, oil, and propane storage water heaters

These more traditional storage water heaters qualify for the federal tax credit, too. Earning the ENERGY STAR means they are more efficient than standard models and can save you hundreds of dollars in energy cost savings over their lifetime. For more information on certified storage water heaters, click here.

Want Even More Savings?

Utility companies around the country are offering very generous rebates, as much as $1,000, to encourage consumers to purchase ENERGY STAR certified water heaters. Go to https://www.energystar.gov/rebate-finder to find incentives in your area.

What else do I need to know?

Heating water is the second largest energy-use in your home.  With the tax credits and rebates available on ENERGY STAR certified water heaters, now is the time to act, especially if your water heater is old. Early replacement can help avoid problems like leaks and flooding that sometimes occur when a water heater fails, which is typically around 10 years after installation. If you wait until your water heater fails, then you may miss out on the tax credit and incentives that are available now.

But it’s not just about the money – saving energy reduces greenhouse gas emissions and helps protect our climate.  If all residential water heaters sold in the U.S. were ENERGY STAR certified, we would prevent more than 155 billion pounds of annual greenhouse gas emissions -- equivalent to the emissions from nearly 15 million vehicles.

Eligible water heaters must be purchased by December 31, 2016 and installed in your primary residence to qualify for the federal tax credit. For more information on tax credits, click here.