Prices, codes, and product options referenced below have been reviewed and updated for 2026.
You can collect $2,000 from the government to upgrade your water heater: ‘One of the best energy-saving decisions you can make’
Most people don’t realize that nearly 20% of their home energy costs come from their water heaters. But the good news is, not only is there a type of water heater that is more efficient, which makes it better for the planet and easier on your wallet, the government will pay you for making the switch.
Quick Overview
Heat pump water heaters move heat instead of making it, which makes them two to three times more efficient than standard electric models per Energy.gov. The federal credit that paid up to $2,000 covered only equipment placed in service before December 31, 2025, per the IRS, so check current utility and state rebates before you buy.
The Scoop
Heat pumps — which can heat and cool your home, as well as heat your water (either as a standalone system or part of a combination system) — are the newest and best way to control the temperature in your house year-round.
Instead of burning dirty gas or oil to create heat, heat pumps “use electricity to move heat from one place to another instead of generating heat directly. Therefore, they can be two to three times more energy efficient than conventional electric resistance water heaters. To move the heat, heat pumps work like a refrigerator in reverse,” the Department of Energy explains on its website.
Want to understand how heat pump water heaters compare to other options? Read our tank vs. tankless water heater guide and the complete breakdown of heat pumps and the gas water heater ban.
How It’s Working
While switching from one type of water heater to another will undoubtedly cost you some money, the amount you’ll save on energy bills, in the long run, is massive. According to one estimate, the average American household that makes the switch will save around $1,000 per year.
Even better, you can get a federal tax credit of up to $2,000 (depending on where you live) through incentives offered via the Inflation Reduction Act by transitioning to the eco-friendly option. For the most energy-efficient options available today, check out the best energy-efficient water heaters to buy in 2026 and see ENERGY STAR®-certified heat pump water heaters.
Plus, the technology around these devices continues to improve. Companies like Cala are combining smart tech with heat pump water heaters to help users optimize their water usage, making it even more efficient and saving customers even more money.
What People Are Saying
In a Reddit thread on the topic, one commenter described getting a heat pump as “One of the best energy savings decisions you can make.”
“Mine saved me about $250/yr compared to gas,” they added. “I forget the exact efficiency compared to electric, but the EnergyStar stickers are a good guide on a percentage basis.”
Ready to Upgrade? Discount Water Heaters Can Help
Florida homeowners on the Treasure Coast are in an ideal climate for heat pump water heater efficiency. At Discount Water Heaters, we’ll help you choose the right model, handle the installation, and make sure you have the documentation you need to claim your federal tax credit. Also learn how Discount Water Heaters saves you time and money on every installation.
📞 Call or text: 772-202-6671
🌐 www.DiscountWaterHeat.com
Jeremiah Budin
Sat, November 9, 2024 at 4:30 AM CST
Related resources: Learn more about water heater repair, water heater financing, same-day water heater installation.
Frequently Asked Questions: 2027 Update
2027 Update: answers reflect current guidance from Energy.gov, ENERGY STAR, and other trusted sources.
Can I still get the $2,000 federal tax credit for a water heater?
The 25C credit covered qualifying property placed in service before December 31, 2025, per the IRS. Installs after that date do not qualify unless Congress extends the credit, so check utility and state rebates instead.
How much do heat pump water heaters save?
ENERGY STAR estimates about $550 a year for a household of four compared with a standard electric unit, which adds up to roughly $5,610 over the life of the heater.
What makes a heat pump water heater ENERGY STAR certified?
Integrated electric heat pump models must reach a Uniform Energy Factor of 3.30 or higher, per the ENERGY STAR criteria.
Do heat pump water heaters work in Florida?
Yes. Energy.gov says they work more efficiently in warm climates, as long as the unit sits in a space that stays between 40°F and 90°F.
Related Reading
Related reading: Learn more about water heater financing options and our full range of services. If you run a home service business, our partners at The Blue Collar Recruiter can help you find and train qualified technicians.