Need a new water heater? If you’re looking at purchasing and installing a new water heater after January 1st, 2023, you should seriously consider a heat pump water heater (also called a hybrid heat pump water heater) for a variety of reasons. It’ll save you money in the long run on your utility bills, but there are also current and upcoming discounts and tax credits and will save you money upfront as well.
Here’s why you should consider a heat pump water heater for your home in 2023:
First, they are extremely energy efficient.
According to the Department of Energy at energy.gov, they can be as much as two to three times as efficient as a conventional gas or electric water heater. That will really add up with your monthly energy savings.
A heat pump water heater is essentially the reverse of your refrigerator – they act as a heat funnel that absorbs existing heat from surrounding air and then concentrates it in one place – your water storage tank. Since the unit isn’t directly using gas or electricity to heat the water, it’s saving energy and fossil fuels, not to mention saving you money. This energy saving results in fewer emissions which is why new tax credits under the Inflation Reduction Act are aimed at helping homeowners install new heat pump water heaters and heat pump heating and cooling systems in their homes.
Older heat pump water heaters were really only designed for warmer climates like the American south, but newer units work well even in cold climates like Minnesota, and many have electricity-powered back up heating elements so that you’ll have enough hot water even on the coldest of days. You can read all about heat pump water heaters and how they work here.
Second, there’s an upfront discount.
The Inflation Reduction Act offers upfront discounts that can cover up to 100% of the costs for a new heat pump water heater, depending on household eligibility. For low-income households (households making less than 80 percent of your state’s median income), the program will cover 100 percent of the heat pump water heater costs, up to $1,750. For moderate-income households (household income is 80 to 150 percent of your state’s median income), it covers 50% of of the cost. Get the details here.
There could be more savings available depending on your state, too – there is currently nothing in the IRA stating that a consumer can’t stack state rebates on top of these federal incentives. Enter your zip code into ENERGY STAR’s rebate finder and see what’s available to your state right now.
If you’re not ready to install a water heater right now, don’t panic: there’s time! These discounts are good through September of 2031, so keep that in mind as you plan ahead for a water heater replacement in the future if you’re not quite ready now.
Third, there’s a tax credit incentive.
The Inflation Reduction Act (IRA) offers a 30 percent tax credit for heat pump water heaters, capping at $2,000 per year. The best part: you can stack the upfront discount and the tax credit on top of one another, further reducing your costs of installation. And the credit will reset every year, becoming available again in the next tax year if you want to tackle another energy efficient upgrade like a heat pump HVAC system, clothes dryer, or solar panels.
If you need to upgrade your current electrical panel to make installing a heat pump water heater feasible, the 25C tax credit will cover 30 percent up to $600 of that project, too!
Get ready for savings!
The implementation of the Inflation Reduction Act and the High-Efficiency Electric Home Rebate Act (HEEHRA) is still being sorted out at the state level. It might take until the second half of 2023 for these programs to become widely available. In the meantime, you can see what your household qualifies for by using this savings calculator at Rewiring America, and if you need a new water heater right now, there are $300 ENERGY STAR tax credits available on heat pump water heaters and other types of water heaters today.
Right now, you can contact your local water heater installation experts to see if a heat pump water heater is the best choice for your home’s future.
