Energy Star Water Heater | Save Money On Your Water Heater Purchase


A tank and tankless water heater tax credit was first announced by the US Department of Energy in April 2008. This tax credit also applies to heat pump and solar water heaters

The announcement of Energy Star criteria for water heaters has been instrumental in transforming the water heater industry, by encouraging the development of a new generation of energy efficient water heaters. It has been estimated that in 5 years these new energy star water heaters will save sufficient energy to power hundreds of thousands of homes, while avoiding several tons of carbon dioxide emissions. To further stimulate this transformation, President Obama created a Stimulus Bill whereby an owner of an Energy Star qualified water heater can apply for tax credits for energy efficiency. An Energy Star tank or tankless water heater tax credit will reduce the purchase price and installation cost of your water heater by 30%.

To qualify as an Energy Star water heater, a water heating unit must satisfy certain criteria, including Energy Factor, (EF), first hour rating, and certain warranty requirements. Currently, there are five water heater technologies that are eligible for a 30% water heater tax credit. The tank and tankless water heater tax credit is capped at $1,500. The solar and heat pump water heater tax credit is not capped.

High Efficiency Gas Storage Tank Water Heaters 

High efficiency models are basically the same as traditional gas-fired tank water heaters, but to improve their efficiency they usually have a heat trap, better insulation, electronic ignition, as well as more efficient burners and venting systems.

To qualify for Energy Star energy efficiency tax credits, a water heater in this category must have a minimum Energy Factor (EF) of 0.62.

Recommended high efficiency tank models are Bradford White’s “Defender Safety Series” and Rheem’s “Professional Series”.

Whole House Tankless Gas Water  Heaters

To qualify for a tankless water heater tax credit, these tankless units must have an EF greater than 0.82

Recommended Manufacturer’s of Energy Star tankless gas water heaters are Noritz, Takagi, Rheem, Rinnai, Paloma and Bosch.

Gas Condensing Water Heaters 

Condensing water heaters are the most efficient gas water heaters. Instead of venting their exhaust gases directly to the outside, condensing water heaters utilize the heat of the exhaust gases in the water heating process. They do this by passing these gases through a second heat exchanger. There are both tank-type and tankless condensing water heaters that have efficiency ratings of well over 90%.

Recommended tank-style Energy Star condensing water heaters are the Vertex Series (AO Smith), Phoenix Series (Heat Transfer Products) and the Polaris Series (American Water Heaters).

Recommended tankless condensing water heaters are the Navien CR Series. These models have a 98% efficiency. Other models with very high efficiency ratings are manufactured by Noritz, Bosch and Takagi.

Heat Pump Water Heaters 

Heat pump water heaters are the most efficient electric water heaters, and draw less than 30% of the power of a standard electric tank water heater. Heat pumps take heat from the surrounding air. This heat is then used to heat water in a storage tank. Because they don’t create heat, heat pump water heaters have an EF of 2.0 or higher. Heat pump water heaters usually have backup electric elements, so that in effect they are actually hybrid water heaters.

GE, Rheem and Stiebel Eltron make hybrid heat pump water heaters. If you can’t afford these models, you can convert your conventional electric water heater into a heat pump water heater by purchasing a stand-alone add-on heat pump.

Heat pump water heaters are the only electric Energy Star Water Heater models that qualify for energy efficiency tax credits.

Solar Hot Water Heaters 

The energy from the sun is free, and solar water heaters are therefore the cheapest water heaters to run. There are a wide variety of solar water heating systems. All of them have an electric or gas backup system for bad weather conditions, so there will usually be some operating costs. A solar powered water heater is more expensive than other water heaters but, the savings in your operating costs will allow you to pay for your solar system in 10 years. Solar hot water heaters also usually last longer than other water heaters.

There have recently been excellent reviews of Rheem’s Solaraide passive solar water heating system, and their Solpak active solar system.

Your 30% water heater tax credit is not capped at $1,500, if you purchase an Energy Star heat pump water heater or solar water heater. This can result in substantial savings on both the purchase price and the installation cost.


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