Energy Rebates and Tax Credits for Electric Water Heaters

Hi, I’m Samantha, and if you’ve been browsing the 50–60 Gallon Water Heaters collection and wondering “What incentives can I actually claim?” — this post is your real-world, friendly guide to rebates, tax credits, and choosing the right model.

🔍 Why This Matters

Upgrading your electric water heater isn’t just about comfort — when you pick the right unit, you can tap into tax credits and rebates that lower your cost substantially. Many homeowners miss this step and end up paying more than they need to.

✅ Federal Tax Credits & How They Work

The Basics

• Through the end of 2025 (and in many cases beyond), you can claim a tax credit of 30% of the cost (unit + installation) for qualifying equipment. 

• For heat pump water heaters (which are often the most efficient models), the cap is up to $2,000 under the credit. 

• For other electric water heaters that are not heat pump types, check the eligibility carefully — starting in 2025 you’ll need the manufacturer’s QM code, proof of certification, and the unit must meet or exceed efficiency tiers set by the Consortium for Energy Efficiency (CEE). CEE

• You must own the home (or have qualifying ownership) and the unit must be installed in your U.S. residence. IRS

How to Claim It

• Save your purchase invoice, installation receipt, model info and QM code (if applicable).

• File IRS Form 5695 when you submit your tax return for the year the installation was completed. IRS

• Remember: Rebates and subsidies may reduce your “eligible cost” for credit calculations (i.e., if you got a utility rebate, your tax-credit amount might be slightly lower). 

💡 Rebates from Utilities, States & Other Programs

• Many local utilities, states and regional programs offer rebates for ENERGY STAR certified water heaters. Use the ENERGY STAR Rebate Finder to check eligibility in your ZIP code. ENERGY STAR

• Under the Inflation Reduction Act (IRA) Home Energy Rebate programs, certain households may qualify for up to $1,750-$14,000 in rebates for installing ENERGY STAR electric heat pump water heaters (depending on income and region). 

🛠️ How This Applies to 50–60-Gallon Electric Water Heaters

Since you’re focused on the 50–60 gallon size range, here’s what you need to know:

• If you choose a standard electric storage tank (50-60 gallons) and it meets certification/efficiency criteria, you could still qualify — but many incentives favour hybrid/heat pump models in that size range. 

• For example: In Samantha’s article on the site, it says: “as of 2025, nearly all ENERGY STAR-certified electric water heaters are heat pump (hybrid) models.” 

• So if you're buying a 50- or 60-gallon model, check that it has:

  • ENERGY STAR certification (or meets equivalent standard)

  • The manufacturer’s QM code (if required)

  • A high UEF (Uniform Energy Factor) rating resulting in strong efficiency

  • Eligibility for your state/utility rebates

📋 Step-by-Step Checklist For You

Here’s a checklist to make sure you qualify and maximize your savings:

1. Check model eligibility: Pick a 50-60 gallon unit that is ENERGY STAR certified or meets the requisite UEF/CEE tier.

2. Keep documentation: Save invoice, model number, installation date, installer name, QM code (if applicable).

3. Check rebate programs locally: Use the ENERGY STAR Rebate Finder and check state/utility offers.

4. Install before year-end (if a time-sensitive program) and ensure installation meets code.

5. File your tax credit: Use Form 5695, claim 30% up to the maximum allowed for that year.

6. Subtract any rebates: If you got utility rebates, subtract them from the cost before calculating the tax credit.

7. Plan placement & installation: Some rebates may require certain installation conditions (venting, space, etc.) — especially for heat pump water heaters.

🧮 Example Scenario (50-60 Gallon Model)

Let’s say you install a qualifying 50-gallon electric heat pump water heater for $1,200 including installation. You live in a state with a utility rebate of $250.

• Base cost: $1,200

• Subtract rebate: $1,200 - $250 = $950 eligible cost

• Tax credit (30% of eligible cost): 0.30 × $950 = $285

• Plus rebate: $250
  Total savings: $535 off your out-of-pocket cost

If you selected a larger or more efficient model, savings grow accordingly.

🧾 What to Watch Out For

• The tax credit is non-refundable: it reduces your tax liability but won’t create a refund by itself. 

• If you rent a home (and you’re not the homeowner) the credit may not apply. 

• If you purchased the unit but installed after the tax-year, you’ll claim credit the year installation was completed.

• A rebate or subsidy given by the manufacturer or utility may reduce your eligible cost. 

🎯 Samantha’s Final Word

If you’re shopping for a 50–60 gallon electric water heater, this is the perfect time to align your purchase with available incentives. A well-qualified model can significantly reduce your cost — and you’re not just buying hot water, you’re buying savings.

Pick a model that checks the certification boxes, file your tax credit, search for rebates — and you’ll turn what could have been “just another appliance” into a smart financial move.

In the next blog, you will dive deep into a "Troubleshooting Guide: When Your Electric Water Heater Stops Producing Hot Water".