If you're replacing a water heater in 2026, federal Inflation Reduction Act (IRA) credits and rebates make heat pump water heaters significantly cheaper than the sticker price. Stacked with state and utility incentives, a $2,500 hybrid water heater can land at $500-1,000 net out of pocket. This page covers the available programs and how to claim them.
Federal tax credit — Energy Efficient Home Improvement Credit (25C)
Up to $2,000 for heat pump water heaters. The IRA-expanded 25C credit covers 30% of the cost (unit + installation) of an Energy Star certified heat pump water heater, capped at $2,000 per year. Available through 2032.
| Item | Detail |
|---|---|
| Eligible products | Heat pump water heaters (Energy Star certified) |
| Credit amount | 30% of cost |
| Annual cap | $2,000 |
| Available through | December 31, 2032 |
| How to claim | IRS Form 5695, filed with annual tax return |
| Income limit | None (nonrefundable credit — reduces tax owed, doesn't generate a refund beyond your tax liability) |
Models that qualify: AO Smith Voltex, Rheem ProTerra, GE GeoSpring (where still in production), State Premier Hybrid, Stiebel Eltron Accelera. Verify Energy Star certification on the model's data plate.
HEEHRA — High-Efficiency Electric Home Rebate Act
HEEHRA is the IRA's income-qualified rebate program for heat pump water heaters and other electrification upgrades. Run by individual states, rollout timing varies — most states launched in 2024-2025.
| Income tier (vs Area Median Income) | Max rebate per heat pump WH |
|---|---|
| ≤ 80% AMI | $1,750 (100% of project cost up to the cap) |
| 80-150% AMI | $875 (50% of project cost) |
| > 150% AMI | Not eligible for HEEHRA (but still eligible for 25C credit above) |
HEEHRA is point-of-sale: applied at purchase, not as a tax refund. State energy offices manage applications. Critical: HEEHRA and 25C can be stacked, but you cannot use the same cost basis for both — typically claim HEEHRA first, then 25C on remaining cost.
State rebates
Most US states run their own programs beyond the federal IRA. Vary by state and change frequently. Examples in 2026:
- California: TECH Clean California — $1,000-3,000 heat pump water heater rebate (stacked with utility incentives)
- New York: NYSERDA — $700-1,400 heat pump water heater rebate
- Massachusetts: Mass Save — $750-1,500
- Maine: Efficiency Maine — $750-1,750
- Colorado: Xcel Energy partner — $700-1,000
- Washington: Washington Clean Energy Fund — varies by utility
- Oregon: Energy Trust of Oregon — $500-1,200
- Vermont: Efficiency Vermont — $400-800
Check your specific state via the DSIRE database (dsireusa.org) — the comprehensive US incentive directory.
Utility company rebates
Most US electric and gas utilities run their own efficiency programs. Often $100-500 for a heat pump water heater, sometimes more. Some utilities pay for the actual installation if you choose a participating contractor. Check your utility's "ways to save" or "rebates" section online.
Common utility programs in 2026:
- PG&E (CA): $500-800 heat pump WH
- SCE (CA): $500-1,000
- ConEd (NYC): $200-500
- National Grid (NY/MA): $500-1,000
- Eversource (CT/NH/MA): $500-1,500
- Dominion (VA): $300-600
- Xcel Energy (CO/MN): $400-800
- Puget Sound Energy (WA): $500-800
Stacking — actual net cost example
Example: California household, 100% AMI, replacing electric tank with AO Smith Voltex 66-gallon heat pump hybrid.
| Unit cost | $2,400 |
| Installation | $1,200 |
| Total project cost | $3,600 |
| HEEHRA rebate (80-150% AMI tier, 50% of cost) | -$1,750 (capped) |
| TECH Clean California (state) | -$1,000 |
| PG&E utility rebate | -$500 |
| Federal 25C credit (30% of remaining $350 cost basis) | -$105 |
| Net cost | $245 |
Real-world stacking varies — some programs disallow combination with others, and HEEHRA is income-tested. But the order-of-magnitude opportunity is real for heat pump water heater installs.
Rebates for non-heat-pump units
Most rebates target electrification (heat pumps). For high-efficiency gas tankless or Energy Star qualified gas tank water heaters:
- Federal 25C — does NOT cover gas tankless (heat pumps only since 2023 changes)
- State programs — some still rebate high-efficiency gas tankless ($100-500). Check DSIRE
- Utility gas-side — gas utilities sometimes rebate high-efficiency tankless to reduce demand
How to claim — step by step
- Before purchase: verify Energy Star certification on the model you're considering. Check HEEHRA / state / utility eligibility lists
- Keep all receipts: unit purchase, installation labor, permit, electrical work
- Take photos: data plate (model + serial), unit installed, EnergyGuide label
- HEEHRA / state / utility: apply within their deadline (usually 60-180 days post-install). Most are online forms
- Federal 25C: file IRS Form 5695 with your annual return. Keep documentation for 7 years
Things to watch out for
- Energy Star certification required for most rebates — check the model's certification listing on energystar.gov
- Income verification for HEEHRA — collect prior year tax return
- Installer requirements — some rebates require a "participating contractor" or licensed installer
- Deadline windows — most rebates expire 60-180 days after install
- Form 5695 caveat — 25C is nonrefundable; if your federal tax owed is less than $2,000, the credit only zeroes out your tax, doesn't generate a refund beyond that
Related guides
Bottom line
If you're replacing in 2026, run the math on a heat pump water heater. Federal 25C ($2,000), HEEHRA ($1,750 if income-qualified), state rebate ($500-1,500), and utility rebate ($200-1,000) can stack to make a $3,000-3,600 hybrid install net out at $500-1,500. Verify Energy Star certification before purchase; keep all documentation.