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Heat pump water heaters are more efficient than standard electric water heaters, helping to save money and energy. See how you can take advantage of federal funding to purchase a heat pump water heater.
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Background
Heat pump water heaters take heat from the surrounding air to heat the water in a tank, which distinguishes them from water heaters that generate heat by using an electric heating element or burning gas. According to the U.S. Department of Energy, water heating is typically a home’s second largest energy expense. A heat pump water heater can cut electricity usage by about half compared to a standard electric water heater, saving a household of four around $470 annually. Heat pump water heaters can last up to 15 years (which is longer than conventional water heaters), are easy to install, and are efficient in all climates. In addition, as part of the federal Inflation Reduction Act, you may be able to use a tax credit to purchase a heat pump water heater (see below).
Federal Tax Credit and Requirements
1. Heat Pump Water Heater Tax Credit
a. The tax credit is in effect from January 1, 2023 – December 31, 2032. Each year that you make eligible improvements, you can claim the maximum annual credit.
b. The Heat Pump Water Heater Tax Credit is part of the Energy Efficient Home Improvement Tax Credit. The Energy Efficient Home Improvement Tax Credit may enable you to qualify for a tax credit up to $3,200. Of that amount, up to 30%, with a maximum of $2,000 (including labor for installation), may be claimed for any combination of electric or gas heat pump water heaters, electric or gas heat pumps, and biomass stoves and boilers. See www.savingenergytips.org for additional opportunities to save money and save energy with tax credits.
c. Heat pump water heaters that have earned the Energy Star certification can be used for the tax credit, provided the eligible equipment is new and meets or exceeds the highest efficiency tier excluding the advanced tier rating.
d. To claim your tax credit, you will need to file Form 5695.
2. IRS Requirements
a. The heat pump water heater must be installed in the home that is your principal residence. The principal residence, which must be in the U.S., can be a house, mobile home, manufactured home, cooperative apartment, condominium, or a houseboat.
b. New construction and residences you rent out as a landlord are not eligible for this tax credit.
Arizona Related Benefits
Arizona Public Service, Salt River Project, and Tucson Electric Power have heat pump water heater and/or electric water heater programs to help their customers save money. The offerings, which differ for each utility, range from rebates when you buy and install an Energy Star certified heat pump water heater to comparing electric water heaters for purchase. See the website of your utility for details including eligibility requirements.
If you or someone you know need help paying for utility bills or appliances — including air conditioning, you can contact Wildfire, a non-profit organization with partnerships across the state of Arizona. The Arizona Department of Economic Security (ADES), through the Low Income Energy Assistance Program (LIHEAP), offers additional help with utility bills for qualified households.
*Please note the above information taken from federal government and Arizona utility websites is subject to change. We recommend checking the relevant website(s) for updates. We also recommend checking out our webpage for additional opportunities to save money and save energy: www.savingenergytips.org
For more information: [email protected] or (602)252-9227.
Diane E. Brown has worked with the State PIRGs for over 35 years, over half serving as the Executive Director of Arizona PIRG. She is a leader in efforts to protect consumers from unfair marketplace abuses and unsafe products; promote 21st century energy and transportation options; and foster an accessible and accountable government. Diane frequently works with diverse entities; advocates and testifies before elected and governmental officials; and appears on television and radio and in newspapers across the state. Diane’s leadership has helped to secure public interest victories at the Arizona Legislature, the Arizona Corporation Commission, and various state agencies. Diane is a recipient of awards from the Arizona Capitol Times, Phoenix Business Journal, League of Women Voters of Arizona, and Arizona League of Conservation Voters.