Tax Credits for Non-Solar Water Heaters

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Published: January 24, 2012
By: Gil Rudawsky
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2 People Did It

Don’t get in hot water over fuel bills. If you installed an efficient water heater in 2011, you might be eligible for a tax credit.

Effort: Low 1 day (research)
Saves: Med $115/yr (off energy bills)
Investment: Med $1,500-$2,500 (tankless)

Doing the dishes, taking a shower, or cleaning your clothes — you need hot water and lots of it. The government understood, and offers an energy tax credit for adding a more efficient hot water heater to your home.

Tax credit limits and deadlines:

You must have installed the water heater by Dec. 31, 2011.

10% of expenditures, up to $300, for a non-solar water heater, including installation. (You can spend a total of 10% of expenditures up to $500 for all approved energy purchases combined.)

Save receipts and labels for Uncle Sam.

File IRS Form 5695 with your 2011 return.

The Energy Star site will be your safest bet for information on how to get the tax credits. There are many kinds of hot water heaters, and Energy Star is very specific on what is and is not credit-eligible. For instance, it must have a thermal efficiency of at least 90%.

Don’t rely solely on contractors who may not know the details or who promise their products will get the credit in order to make a sale.

As of January 2012, the feds haven’t extended the energy tax credits for water heaters beyond 2011.

Next: Savings, cost, and payback period

Gil Rudawsky

Gil Rudawsky has covered business and consumer issues for 18 years, most recently as a deputy editor at the Rocky Mountain News. He lives in a house built in the 1930s, and always keeps the home’s character in mind when making upgrades.

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