The latest package of grants that the Biden administration and the EPA have confirmed is aimed at energy efficiency in homes. One of them is the new Heat Pump Water Heaters Tax Credit, which will allow you to receive up to 30% of the total cost. How to receive this public subsidy and what you must do to meet the requirements? We tell you in this article with all the keys.
New Heat Pump Water Heaters Tax Credit: EPA and Energy Star have confirmed it
Heat pump water heaters are an energy-efficient alternative to traditional storage tank water heaters. They use electricity to move heat from the surrounding air into the water, instead of relying solely on an electrical heating element. This makes them 2-3 times more efficient than conventional electric water heaters.
The U.S. government recently enacted a new tax credit that covers 30% of the total cost (up to $1000) of installing an ENERGY STAR certified heat pump water heater in your home. This provides a great financial incentive for homeowners looking to upgrade to this energy-saving appliance.
The new Heat Pump Water Heaters Tax Credit, explained by Government
The recently passed Inflation Reduction Act includes a new federal tax credit for homeowners who install an ENERGY STAR certified heat pump water heater. This tax credit covers 30% of the total cost of the water heater and installation, up to $2,000.
To qualify, the heat pump water heater must be installed between January 1, 2023 and December 31, 2032 and meet the following requirements:
- 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)
This tax credit was part of the landmark Inflation Reduction Act signed into law in August 2022. The legislation aims to combat inflation and address climate change through investments in domestic energy production and tax incentives for energy efficient home improvements.
The 30% tax credit on heat pump water heaters makes these energy efficient appliances much more affordable for homeowners. Heat pump water heaters can cut water heating costs by up to 60% compared to conventional models. Taking advantage of the tax credit is a great way to save on upfront costs.
How to find out if you are eligible to receive this tax credit: all the requirements
The new heat pump water heater tax credit is available to homeowners who install a qualifying system in their primary residence or second home. Both itemizers and non-itemizers can claim the credit. For new homes, the heat pump water heater must be clearly listed and separate from the base price on documentation.
To qualify, you must purchase and install a new ENERGY STAR certified heat pump water heater between January 1, 2023 and December 31, 2032. The system must serve as the primary water heating source for the home. Rental properties do not qualify.
The tax credit can be claimed once per tax return, so married couples filing jointly can claim one credit. The limit applies per residence, so you cannot claim multiple credits for installing units in several homes. Both existing homes and new construction qualify.
The tax credit covers 30% of the total system cost, including the unit, labor, and any accompanying parts and materials. There is no cap on the maximum credit amount. Higher efficiency and larger capacity units may result in a greater incentive.
What is clear is that this Heat Pump Water Heaters Tax Credit is one of the easiest public subsidies to receive, at least compared to the one for microturbines that we saw recently. It is designed to reduce the carbon footprint in the residential sector, and is compatible with the others that we have been discussing in previous occasions.
