Looking to save some money on your upcoming home improvement project? Consider installing a Heat Pump Water Heater (HPWH) also called a Hybrid Water Heater. Not only will you be saving on your monthly energy bill, you’ll also be receiving a tax credit from the federal government.

The tax credit is available for purchases and installation of a Heat Pump Water Heater- Hybrid Water Heater from January 1, 2023, to December 31, 2032. This is a great way to reduce your upfront costs and start benefitting from the energy savings right away.

Before you take the plunge, it’s important to understand how Heat Pump Water heaters work and the requirements needed to qualify for the tax credit. HPWHs create hot water by transferring existing heat from the surrounding air and transferring it to the water. This process is much more efficient than traditional electric water heaters, which create heat directly from electricity.

In order to be eligible for the tax credit, your HPWH must have a minimum energy factor (EF) rating of at least 2.0. The EF rating is a measure of how efficient the HPWH is at producing hot water and can be determined by looking at the product specifications. The higher the EF rating, the more efficient the heater is.

If you’re in the process of considering a Hybrid Water Heater, be sure to consult a licensed plumbing contractor to make sure you’re getting the most efficient model possible. They can also help you determine if you qualify for the tax credit and what paperwork you’ll need to file.

Overall, installing a heat pump/Hybrid Water Heater is a great way to improve your home and save money on your energy bill. With the assistance of the federal government’s tax credit, the process has never been easier. Be sure to take the time to research and find the right model for your property, and you’ll be on your way to a more efficient, cost-saving home.

For more information on this tax credit visit the IRS’s page on tax credits.


How long do I have to claim the tax credit for water heaters?

This tax credit is effective for Energy Star purchased and installed between January 1, 2023, and December 31, 2032.

What water heaters are eligible for the tax credit?

Heat pump water heaters that have earned the ENERGY STAR are eligible for this credit.
Note: Under the tax code, eligible equipment must “meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year.”  The eligibility described above is consistent with this requirement.

Is there Annual Limits on Energy Efficient Home Improvement Tax Credits?

In addition to limits on the amount of credit you can claim for any particular equipment installation or home improvement, there are annual aggregate limits.  The overall total limit for an efficiency tax credit in one year is $3,200.  This breaks down to a total limit of $1,200 for any combination of home envelope improvements (windows/doors/skylights, insulation, electrical) plus furnaces, boilers and central air conditioners.  Any combination of heat pumps, heat pump water heaters and biomass stoves/boilers are subject to an annual total limit of $2,000. (Note: ENERGY STAR certified geothermal heat pumps are eligible for a separate tax credit and not counted against these limits.)

I’m a home owner am I eligible for the tax credit?

Must be an existing home & your principal residence. New construction and rentals do not apply.
A principal residence is the home where you live most of the time. The home must be in the United States. It can include a house, houseboat, mobile home, cooperative apartment, condominium, and a manufactured home.

About the Author

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Eric Strand is a highly experienced master plumber and the owner of Water Heating Experts LLC, a reputable plumbing company based in Palm Beach Gardens, Florida. With over two decades of industry expertise, Eric has established himself as a trusted professional in the field of plumbing and water heating services.

Eric began his plumbing journey in Colorado in 1995, where he obtained his master plumber license. His dedication to his craft and commitment to delivering exceptional workmanship quickly earned him a stellar reputation among clients and colleagues alike. Throughout his career, Eric has consistently demonstrated a strong work ethic, attention to detail, and a passion for providing reliable and efficient plumbing solutions.

In 2004, Eric expanded his professional horizons by acquiring a certified plumbing contractor license in Florida. This enabled him to bring his extensive knowledge and expertise to the vibrant plumbing market in the state. Recognizing the growing demand for specialized water heating services, Eric established Water Heating Experts LLC to cater to the unique needs of residential and commercial clients in Palm Beach Gardens and surrounding areas.

Prior to founding Water Heating Experts LLC, Eric also owned and operated DesignerPlumbingOutlet.com. Through this venture, he gained valuable insights into the plumbing industry and developed a deep understanding of customer preferences and the latest trends in plumbing fixtures and accessories. This experience further enhanced his ability to provide comprehensive and customized plumbing solutions to his clients.

As the owner of Water Heating Experts LLC, Eric Strand continues to lead his team of skilled professionals in delivering top-notch plumbing services. From water heater installations and repairs to plumbing system maintenance and emergency plumbing assistance, Eric and his team are known for their prompt response, technical proficiency, and dedication to customer satisfaction.

Eric's commitment to excellence extends beyond his business endeavors. He actively stays up-to-date with the latest advancements in plumbing technology and techniques, ensuring that Water Heating Experts LLC remains at the forefront of the industry. Additionally, Eric maintains strong professional affiliations, regularly participating in industry associations and fostering collaborations with other plumbing experts.

With his impressive track record, Eric Strand is regarded as a reputable and reliable authority in the plumbing industry. Whether it's resolving complex plumbing issues or providing expert advice on water heating solutions, Eric's expertise and customer-centric approach make him a go-to professional for all plumbing needs in Palm Beach Gardens, Florida.

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