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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

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

UPDATED JANUARY 2021: The Non-Business Energy Property Tax Credits have been extended from 12/31/2017 through 12/31/2021. This means that the tax credit covers purchases of qualifying new non-solar water heaters (including electric heat pump (hybrid), gas, oil or propane) made before December 31, 2021. Plus, good news – it also retroactively applies to purchases made in 2018 and 2019. Ask your tax professional about amending your return for that year to take advantage of the tax credit. The IRS typically limits amendments to three years.

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 2020 taxes yet (due April 15, 2021), you can download the 2020 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


*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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