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$300 Federal Water Heater Tax Credit

Is your water heater eligible for a $300 tax credit?

For full information on all federal tax credits, visit energystar.gov.

Is Your High-Efficiency Water Heater Eligible for a Tax Credit?

JANUARY 2022 UPDATE: The Non-Business Energy Property Tax Credits expired on December 31, 2021. Congress has not (yet) approved an extension. The tax credits apply to certain home improvements including energy efficient water heaters.

In January 2021, the tax credits were extended to cover purchases of new non-solar water heaters (including electric heat pump (hybrid), gas, oil or propane) and other qualifying equipment made before December 31, 2021. The also credit retroactively applies such upgrades made in 2018 and 2019. Please consult with your tax professional for details on how to apply for the credit.

What is the Tax Credit?

Tax Credit: $300 (Maximum of $500 for all energy efficiency improvements claimed under this credit)
Purchase by: December 31, 2021
Claim by: April 15, 2022
Details: Equipment must be installed in an existing home & your principal residence. New construction and rentals do not apply.

What are the Requirements?

Electric Heat Pump Water Heaters

In order to receive a tax credit of $300, the electric heat pump (hybrid) water heater must meet the following criteria:

Uniform Energy Factor (UEF) >= 2.2

Gas, Oil or Propane Water Heaters

The following criteria must be met in order to receive a tax credit of $300:

Uniform Energy Factor (UEF) >= 0.82 OR a thermal efficiency of at least 90%.

View the Manufacturer’s Certification Statement from Rheem, listing all of their qualifying water heater models.

What’s the Catch?

The federal tax credit only applies to equipment installed in existing homes, not new construction. The home must also be your primary residence – no secondary residences or rentals. You can only claim up to a total maximum credit of $500 for all of the years (2005-2021) combined. If you’ve already claimed $500 from the Nonbusiness Energy Property Tax Credit since 2005, you won’t be eligible to claim any more credits.

How Do I Apply?

File IRS Form 5695 with your tax return. If you haven’t filed your 2021 taxes yet, you can download the 2021 form here. The credit amounts you may receive are subject to IRS regulations, so we recommend consulting a tax professional for advice on tax preparation.

To What Other Appliances Does the Tax Credit Apply?

Even if you don’t plan on upgrading your water heater, you might intend to purchase another qualifying household appliance like an air conditioner or heat pumpCheck the entire list of qualifying appliances.

For full information on all federal tax credits, visit energystar.gov.

*Disclaimer: The tax credit information contained within this website is provided for informational purposes only and is not intended to substitute for expert advice from a professional tax/financial planner or the Internal Revenue Service (IRS).

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