Most people don't think about their water heater until it breaks. And here's the deal: The one in your basement or closet is probably older, costs more to run, and is worse for the planet than you think. But there is a better option, and — thanks to federal tax credits and rebates — it's way more affordable to install.
Heat pump water heaters use electricity to move heat rather than generate it, which means they use around three times less energy than traditional water heaters. Because they're electric, they also can help reduce your home's carbon pollution, especially if you're switching from natural gas, and save you up to $550 a year on energy bills.
Replacing a water heater isn't cheap, but if you go with a heat pump model, the federal government will cover a big chunk of the cost. Through the Inflation Reduction Act, you can get up to $1,750 in rebates plus a 30% federal tax credit (up to $2,000) toward the cost of installing one.
While some rebate programs were briefly paused when federal payments were frozen, the funding portal has since reopened — and states including California, New York, Maine, and New Mexico are continuing to offer rebates, The New Republic reported.
Even if you don't live in one of those states, the tax credits are still active nationwide, and they're unlikely to disappear midyear because it would "take an act of Congress to change that," said David Friedman, senior director for federal policy at Rewiring America. Still, since President Donald Trump has repeatedly promised to eliminate these types of subsidies, acting sooner rather than later could be worth thousands of dollars.
These upgrades can make a real difference, especially for low- and moderate-income households. "These are folks who are much more likely to put a Band-Aid, effectively, on their hot water heater or their heating and cooling system because they can't afford to repair it, and that traps them in an expensive cycle. It sticks them with an outdated unit that costs more to operate and so they have higher utility bills," Friedman told The New Republic.
One company making these upgrades even more accessible is Cala. Its smart, highly customizable heat pump water heaters don't just reduce your energy bills and pollution — they also make your home more livable by heating water only when it's needed.
Want to make your home more efficient and comfortable while saving money? Now's the time to look into installing a heat pump or adding solar panels while incentives are still available.
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