Tankless Water Heater Tax Credit

Frequently Asked Questions

If you’ve been considering switching out your old water heater for a new tankless water heater, now may be the best time. For a limited time, the federal government is offering a federal tax credit for energy efficient home improvements that include installing a qualified tankless water heater.

This means that between the energy savings and the tax credit, your new tankless water heater could practically pay for itself. To help you decide if the tankless water heater tax credit can help you, here are some frequently asked questions.

What is the tankless water heater tax credit?

• In February of 2009, President Obama signed The American Recovery and Reinvestment Act of 2009. This Act made significant changes to residential energy tax credits for specific home improvements like installing qualifying tankless water heaters. It not only extended the deadline to December 2010 but also increased the credit from 10% to 30% of the cost of the qualifying improvements. 

How much will I receive with the tankless water heater credit?

• If you qualify for the federal tax credit, then you will get 30% of your costs of purchasing the tankless water heater and having it installed. However, the max credit you can receive is $1500. 

What are the qualifications for the tankless water heater credit?

• You must install a tankless water heater that meets the minimum energy factor to qualify for the credit. 
• The tankless water heater must be fully installed in the homeowner’s primary U.S. home by December 31, 2010. 
• The federal tax credit will only be approved for existing homes, so new construction will not qualify. 
• Tankless water heaters purchased and installed before January 1, 2009 will not qualify for the tax credit. 

How do I claim my tankless water heater credit?

• First, you’ll need to purchase a qualifying tankless water heater and install it between January 1, 2009 and December 31, 2010. 
• Make sure to save the receipt from your purchase installation. You should also save your Manufacturer’s Certification Statement. 
• When you file your taxes, use the appropriate IRS form. Talk to a tax professional if you’re unsure about which form to use.