Ditching your old water heater can save you nearly $3,000 — here’s how to make the switch

Unfortunately, our water heaters are secret devices that secretly account for almost 20% of our home’s energy use.

That amounts to hundreds of dollars every year – all for a device that we keep tucked away in a basement or closet and rarely think about.

But it doesn’t have to be that way. If your current water heater is reaching the end of its life (more on that in a moment), there are a lot of reasons to consider a heat pump water heater as a replacement—starting with the fact that this unit could save you nearly $3,000 in the first 10 years.

What is a heat pump water heater?

Unlike traditional water heaters, which typically generate heat using gas or electricity, heat pump water heaters heat your water by collecting heat from the environment and transferring it to the tank.

It’s a strange-sounding process that produces some shocking results – by many estimates, these devices are three to five times more efficient than traditional devices. It’s similar to the way standard heat pumps, which are becoming increasingly popular in many states, can heat and cool homes much more efficiently.

If these devices sound high-tech, that’s because they are. And they come with a matching price tag. The only downside is that they are usually more expensive than a traditional water heater (usually in the $1,500 to $3,000 range), but you will recoup your investment and quite a bit in savings.

How can this save me money?

This is where efficiency comes into play. On average, a heat pump water heater will save you around $330 per year just through its functionality. This is a big step at a time when electricity bills have been rising steadily over the past five years.

And in addition to the annual savings, the state literally pays you to purchase such a device. Thanks to the Inflation Reduction Act, you may be eligible for a tax credit of up to $2,000 with an upfront rebate of up to $1,750 – in some cases, this could essentially cover the upfront costs.

When all is said and done, you will have saved around $2,800 over 10 years. But it’s possible that the savings train will keep rolling, because many heat pump water heaters last longer than their gas-powered counterparts.

When should I think about purchasing it?

The short answer is: only when you need it.

Water heaters can last for different lengths of time, but conventional wisdom suggests that it’s worth changing after about 10 years. If anything takes longer, you’re at risk for a pretty nasty household disaster (think: 50 gallons of water or more spilling onto the floor).

Another tip? Keep an eye on your monthly energy bills. If your costs increase unexpectedly, it could be a sign that your water heater is having problems and needs to be replaced.

From there, it might be time to consider a heat pump water heater. Making the switch before things get out of hand can save you even more money (and some headaches).

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