Renew or die, and the government prefers the first option. It has now launched a $2,000 tax credit for those who replace their traditional water heater with a more modern one (the kind that comes with a heat pump because they are more sustainable). So, if you still have an old water heater and have been thinking about changing it, you have until December 31 to receive $2,000 and make the replacement less expensive.
Why change the water heater?
First, because they offer you $2,000 just for changing it, and second, because old heaters account for almost 12% of the energy consumption of an average home. So, switching to a newer and more efficient one will help you save quite a bit of money each year.
How does the credit work?
Basically, the program refunds 30% of what it costs you to buy and install it, with a maximum amount of $2,000 per year.
In other words, if you install a heat pump water heater that costs $4,700, you could get back $1,400 when you file your tax return.
Lower-income households can qualify for an extra rebate of up to $1,750 through the Home Electrification and Appliances Rebate Program.
This will be available until September 2031, or until the funds run out (so it’s better not to wait too long).
Is it worth switching to a heat pump water heater?
Yes, in fact, they are much more efficient, cleaner, and cheaper to maintain. It is estimated that they use two to three times less energy.
According to Energy Star, a family of four can save up to $550 a year just by making this change, and you also help reduce pollution because you don’t need gas or fossil fuels.
A user on social media mentioned that their 270-liter LG model barely consumes 750 kWh per year compared to 4,000 kWh from a regular electric water heater. Not bad.
The credit expires soon
This was created under the Inflation Reduction Act (IRA) approved three years ago, in 2022, but it has an expiration date and ends this December 31, 2025. That means you have less than two months to buy and install it if you want to include it in your 2025 tax return.
How to apply
Claim the credit when filing your federal tax return using the corresponding IRS form.
If you also want to access the additional rebate, check your household’s eligibility through Energy Star.
Beyond the savings
“We switched to a heat-pump water heater last year and honestly, it’s been amazing. Our electric bill dropped by about 30%, and it’s so quiet you barely notice it running. The upfront cost was a bit scary, but the tax credit made it manageable. I wish we’d done it sooner” said an user
What the government wants is to reduce carbon emissions, and it is estimated that if 10% of Americans made the switch, more than 20 million tons of CO2 would be reduced per year.
Thus, the demand for clean technologies is growing, and users’ wallets are not feeling it as much (I emphasize “as much” because changing the water heater is quite expensive, hence the credit).
But this is an opportunity that will soon say goodbye, and anything that helps save a bit is always welcome. Especially if it’s something you will have to replace eventually, better to do it now while you still get a refund!