Federal Tax Credit for Energy Efficiency – Water Heaters

water heater, energy efficient water heater

The Federal Tax Credit for Energy Efficiency – Water Heaters expired in 2011. The President chose not too extend this tax credit. Local energy utility companies like PG&E have their own energy efficiency rebates. To find out if rebates or other incentives are available in your area, visit the ENERGY STAR Rebate Finder.

Be sure to check out our reduce water heater use, water saving tips and ways to save energy.

The 2011 Federal Tax Credit

There is a Federal Energy Efficiency Tax Credit on Qualifying Gas, Oil, Propane Water Heaters as well as Electric Heat Pump Water Heater and Solar Water Heaters. If your water heater is on its last legs, you might as well upgrade now and save some money. Newer water heaters require less energy and time to heat water. Reduce the waiting time between showers and doing laundry.

For 2011, the Federal Tax Credit for energy efficiency drops to 10%, up to a $500 maximum. (2010 Federal Tax Credit information)

  • $300 cap for water heater
  • Gas, Oil, Propane Water Heaters must have Energy Factor >= 0.82 or a thermal efficiency of at least 90%
  • Newer Hybrid water heaters are also available
  • Electric Heat Pump Water Heater requirements are the same as ENERGY STAR: Energy Factor >= 2.0.
  • Existing home and principal residence.   New construction and rentals do not qualify.
  • Expires December 31, 2011 – Consult the What other rebates are available? below for other possible rebates.

Consider an on demand Tankless Water Heater if your situation allows for it.  Most need ready access to a good sized gas pipe and exhaust vent.

Solar Water Heaters are covered if they are EnergyStar certified. The Federal Tax Credit for solar water heaters is 30% of the cost including installation and labor. It expires December 31, 2016.

AO Smith makes the hi tech Vertex 100 water heater that is very efficient, but requires PVC pipe venting not normal metal venting. Also consider installing radiant floor heating instead of using a gas furnace as these newer water heaters support radiant heating.

Note: It is difficult to find larger sized water heaters with Energy Factor’s not qualify.

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