Slash Your Energy Bills and Earn Tax Credits with Efficient Water Heaters

tankless water heater

In the quest for a more energy-efficient and cost-effective home, one of the smartest upgrades you can make is to your water heater. Not only can this move significantly reduce your energy bills, but it can also make you eligible for valuable tax credits. Let’s dive into how upgrading to energy-efficient water heaters, like tankless gas water heaters and heat pump water heaters, can lead to substantial long-term savings.

Understanding the Cost-Saving Potential of Energy-Efficient Water Heaters

Traditional water heaters can be a significant energy drain in most homes. By switching to energy-efficient models, you stand to reduce your energy consumption substantially. For instance, ENERGY STAR® certified water heaters can save a homeowner up to $3,500 over the unit’s lifetime. The savings come from these heaters’ ability to heat water more efficiently and reduce standby heat losses.

Tankless Gas Water Heaters: A Long-Term Saving Star

Tankless gas water heaters, also known as on-demand water heaters, heat water directly without the use of a storage tank. When a hot water tap is turned on, cold water travels through a pipe into the unit where a gas burner heats it. This process eliminates the standby energy losses associated with storage water heaters and can save you about $108 per year, as estimated by ENERGY STAR®.

Traditional tank water heaters usually last 8-12 years. A tankless water heater can last up to an eye popping 20 years or longer. In the long run, a tankless water heater can save a substantial amount of money and stress.

Heat Pump Water Heaters: The Eco-Friendly Choice

Heat pump water heaters represent another energy-efficient option. These units transfer heat from the surrounding air to the water, using up to 60% less energy than standard electric water heaters. Though the initial cost may be higher, the long-term savings are considerable, with an average annual saving of about $330.

Heat pump water heaters can last up 10-15 years – longer than a traditional tank water heater, shorter than a tankless water heater.

Tax Credits: A Bonus for Your Eco-Friendly Choice

The federal government offers tax credits for homeowners who install energy-efficient water heaters. Under the current policy, you can receive a tax credit for 30% of the cost, up to $600 ($2,000 for heat pump water heaters), for installing an ENERGY STAR® certified water heater. This incentive not only lowers the initial investment cost but also accelerates your return on investment..

Maximizing Savings with Rebates

In addition to tax credits, many local utility companies offer rebates for installing energy-efficient water heaters. These rebates can further reduce your initial costs. For specific information about rebates in your area, you can check the ENERGY STAR® rebate finder tool.

Your local utility company might offer additional rebates. You can search on their sites, or use the ENERGY STAR Rebate Finder

Long-Term Savings: A Win-Win Situation

The long-term savings of energy-efficient water heaters extend beyond just your energy bill. With lower energy usage, you’re also contributing to a reduced carbon footprint, making a positive impact on the environment. Plus, the improved efficiency of these systems means less wear and tear, leading to a longer lifespan and fewer repairs.


Investing in an energy-efficient water heater is a smart decision for any homeowner. Not only do these appliances lower your energy bills, but they also offer tax credits and rebates, making them an economically savvy choice. With the added benefit of being environmentally friendly, upgrading your water heater becomes a decision that benefits both your wallet and the planet.

Remember, while the upfront cost may be higher than traditional water heaters, the long-term savings and tax incentives make energy-efficient models a wise investment for your home. By making this upgrade, you’re not just saving money; you’re also taking a step towards a more sustainable and efficient lifestyle.



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