Inflation Reduction Act: Heat Pump Water Heater Tax Credit
Save money when upgrading to an energy-efficient water heater with a tax credit from the federal government.
Rebate Overview
Overview
The Inflation Reduction Act offers a tax credit for installing an ENERGY STAR certified heat pump water heater. This credit covers 30% of the project cost, up to a maximum of $2,000 per year. You can claim this credit annually for eligible installations. To qualify, the heat pump water heater must be installed in your primary residence. Upgrades completed in 2025 can be claimed on your 2025 tax return, filed in early 2026. Please note, the tax credits are set to expire after December 31, 2025. Therefore, it's advisable to complete your upgrade before this date to take advantage of the credit.
Benefits
Upgrading to a heat pump water heater can make your home more comfortable and energy-efficient. It also helps reduce pollution from gas appliances, benefiting the environment.
More Information
- The heat pump water heater must be installed in your primary residence.
- The credit applies to both the equipment and installation costs.
- To claim the credit, include the project expense on Part II of Form 5695 when filing your taxes.
- Ensure the heat pump water heater meets ENERGY STAR standards.
- The credit is available for installations completed in 2025 and claimed on your 2025 tax return.
- The tax credits are set to expire after December 31, 2025.
Details
- Expiration date: December 31, 2025
- Incentive type: Tax Credit
- Amount: $ 2,000
- Maximum Amount: $ 2,000
- Maximum Percent: 30%
- Category: Water Heater Heat Pump
- Link: More details
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