Federal Tax Credit
WHAT IS THE INFLATION REDUCTION ACT?
To help reduce the effects of inflation, the U.S. Government has passed the Inflation Reduction Act of 2022. Of particular interest to homeowners, this act includes a number of tax credits for the installation of ENERGY STAR® certified home heating and cooling products. These include:
Tax Section 25C, Nonbusiness Energy Property Credit
Effective Jan 1, 2023: Provides a tax credit to homeowners equal to 30% of installation costs for the highest efficiency tier products, up to a maximum of $600 for qualified air conditioners and furnaces, and a maximum of $2,000 for qualified heat pumps.
Subject to change: While the 2023 benefits of Section 25C are known for the 2023 tax year and beyond, the criteria to qualify for credit(s) are not yet finalized by the IRS and the above is subject to change based on whether the IRS will adopt the full CEE Criteria.
Tax Section 25D, Residential Energy Efficient Property
Provides a tax credit to homeowners equal to 30% of installation costs for ENERGY STAR® geothermal heat pumps until 2032. That percentage drops to 26% in 2033 and 22% in 2034.
High-Efficiency Electric Home Rebate Program
Provides income-depending rebates to eligible homeowners including:
- Up to $8,000 for all-electric Heat Pumps
- Up to $4,000 for electrical load service center
- Up to $2,500 for electric wiring
- Up to $14,000 maximum for all
Contact H & H Today!
Did you know that you may qualify for a $2,000 federal tax credit when upgrading to a heat pump water heater? That’s a substantial opportunity to lower your water heater costs while improving home’s energy efficiency. But here’s the thing – it’s important that you act now because these federal tax credits expire on December 31st, 2025!
This guide breaks down how the incentive works, who qualifies, and how to claim the heat pump tax credit, helping you reduce upfront expenses while promoting clean, efficient energy use at home.
What Is the $2,000 Federal Tax Credit for Heat Pump Water Heaters?
The rebate comes from the Energy Efficient Home Improvement Credit, part of the Inflation Reduction Act of 2022. This federal program allows homeowners to claim 30% of the costs, up to $2,000 annually, for qualified water heater upgrades, including both equipment and installation.
The credit is available for installations completed between 2023 and 2025, making it one of the most valuable appliance rebates currently offered. Whether you’re looking to cut your utility bills or reduce your carbon footprint.
