Maximize Your Home’s Efficiency: A Guide to Tankless Water Heater Tax Credits and Rebates


Imagine… you could purchase a tankless water heater, save money on your utility bills every month, help protect the environment, AND get tax credits and rebates that would save you money right now!

Water heating is the second largest user of energy in your home. So when it comes to household energy-efficient home improvements, upgrading to a tankless water heater stands out for its ability to reduce energy consumption and save money on water heating costs.

But many homeowners are unaware of the financial incentives available that make the decision to upgrade even more compelling. Tankless water heater tax credits and rebates can significantly reduce the upfront cost of a tankless water heater, leading to substantial savings over time.

In this in-depth exploration, we’ll uncover the ins and outs of tankless water heater tax credits and rebates – demystifying the process and empowering you to take advantage of what’s often an under-utilized financial benefit to save you money.

Understanding Tankless Water Heater Tax Credits and Rebates

Federal Tax Credits

The federal government has, for several years, incentivized the adoption of energy-efficient appliances and home upgrades through tax credits. When it comes to tankless water heaters, homeowners can benefit from the Federal Water Heaters Tax Credit, which offers a credit when these systems are installed in existing homes.

To qualify for this credit, the tankless water heater must meet specific energy efficiency requirements, and installation should be complete by December 31, 2032. The credit amount is substantial, 30% of the project cost, including installation, with a maximum of $600.

State-Level Incentives

Beyond federal offerings, many states have their own tankless water heater tax credit programs, some of which are more favorable than the federal credit. These can vary greatly in terms of eligibility, credit amount, and the types of upgrades or systems that qualify. Therefore, it’s crucial for homeowners to explore what their state offers by checking with the State Energy Office or a local Department of Revenue.

Utility Rebates

In addition to government tankless water heater tax credits, utility companies – in a bid to reduce peak power demand and promote energy efficiency – offer rebates for the installation of high-efficiency tankless water heaters. These tankless water heater rebates can range from a few hundred to a few thousand dollars and are usually applicable at the time of purchase or installation and provide instant savings.

How Tankless Water Heater Tax Credits and Rebates Can Benefit You

While both tank and tankless water heaters have their place, tankless water heaters offer some advantages over traditional tank water heaters. They save space, provide endless hot water, and can save you significant amounts of money on your monthly utility bills. Tankless water heaters may have a longer lifespan than tank water heaters however, the up-front cost of a tankless water heater is typically higher.

Tankless water heater tax credits and rebates can help lower this up-front cost, so the tankless water heater will effectively pay for itself in energy savings faster than would otherwise be possible.

Eligibility Criteria

Understanding Energy Efficiency Standards

For any tax credit or rebate, the installed tankless water heater must meet certain energy efficiency standards. This typically translates to an Energy Factor (EF) rating above a specified number, ensuring that the system offers a notable improvement in energy use over standard models.

Installation Guidelines

Proper installation is key to qualifying for these incentives. For some tax credits and rebates, using a professional installer certified by the manufacturer may be required. Keeping documentation of the purchase, including the model number, energy efficiency rating, and the installer’s certification, is essential. Find a Bradford White plumbing professional in your area here.

How to Claim Water Heater Tax Credits and Rebates

Steps for Federal Tax Credits

To claim the Non-Business Energy Property Credit, homeowners must:

  • Maintain a record of the purchase and installation of the tankless water heater.
  • Complete IRS Form 5695 and attach it to their regular Form 1040 when filing taxes.
  • Ensure that the system meets the necessary efficiency standards and was installed in their primary residence.

Applying for Utility Rebates

The process for applying for utility rebates is usually easy, but it varies by provider. It generally involves filling out an online application or mailing in a form along with proof of purchase and installation. Check with your specific utility company for detailed instructions.

Additional Considerations

Homeowners should be aware of the expiration dates for rebates and tax credits, as well as any changes in state or local laws that might affect their eligibility.

Economic and Environmental Benefits

Long-Term Cost Savings

A tankless water heater can deliver savings on monthly energy bills, ranging from 8% to 34% according to the U.S. Department of Energy. When coupled with tax credits and rebates, the cost savings become even more significant, potentially leading to a quick return on investment. Tankless water heaters can effectively pay for themselves over time when you factor in tax credits and energy savings.

Environmental Impact

Reduced energy consumption translates to a lower carbon footprint and a more sustainable home. Tankless water heaters are especially beneficial as they only heat water when it’s needed, so you’re not using energy to heat water that you’re not currently using.


Investing in a tankless water heater not only provides immediate benefits in the form of endless hot water and saved space but can also lead to everyday energy savings, long-term financial gains, and a reduced environmental footprint. Learn more about Bradford White tankless water heaters and the benefits of tankless here.

Understanding and taking advantage of available tankless water heater tax credits and rebates is a smart way to further maximize the advantages of tankless water heaters. Find the rebates that are available in your area at the Bradford White Rebate Center.

Homeowners are encouraged to not only educate themselves on the potential savings but to act on this knowledge. Explore the tax incentives in your area, consult professionals for certification, and reach out to your utility company for possible rebates. By doing so, you tap into resources that not only reward your environmentally conscious decision but also provide welcome relief to your household budget.

In an age where every penny counts and the preservation of our planet is of utmost importance, tankless water heater tax credits and rebates aren’t just perks, they’re powerful tools to help you modernize your home, enhance your quality of life, and contribute to a sustainable future. Learn more about Bradford White tankless water heaters here.