The government wants to give you $1,750 to ditch your inefficient water heater — here’s how to collect before the money disappears

Water heaters are a popular staple in every home, providing steamy showers and soothing baths, but they can eat up a lot of energy (and money). But there are a few ways to save a lot of money and still feel refreshed.

According to the U.S. Department of Energy, water heating accounts for up to 18% of your home's energy use and is typically the second largest household expense. That means an average household spends between $400 and $600 on electricity bills each year. One of several ways to reduce these costs, besides using less water and adding additional insulation to your pipes, is to upgrade to an energy-efficient heat pump water heater.

Heat pump water heaters use electricity to move heat from one place to another rather than generating heat directly, as Energy Star explains. This efficiency can save a family of four an estimated $550 per year on energy costs.

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Savings increase when you take advantage of Inflation Reduction Act (IRA) rebates and tax credits. Passed in 2022, the IRA rewards homeowners for eco-friendly upgrades to their homes, such as solar panels and appliances. In the case of heat pump water heaters, you could receive $1,750 through a home electrification and appliance rebate (depending on income eligibility and where you live). Or, this appliance upgrade could help you get a rebate as part of a larger home energy renovation. Additionally, you could receive an additional $2,000 in tax credits.

You may want to act on the IRA offer sooner rather than later due to the upcoming administration. According to The Salt Lake Tribune, President-elect Donald Trump has stated that he intends to disband the IRA once he takes office. However, any changes would require an act of Congress to take effect, making the IRA's future uncertain but not a given.

Energy Star offers guides for finding an installer for heat pump water heaters and other appliances that meet IRA requirements for refunds and tax credits.

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One standout brand is Cala, the developers of a smart heat pump water heater. Cala's model is highly customizable and takes into account household habits to heat water exactly when it is needed, increasing comfort at home. By maximizing efficiency, your water bill and environmental footprint will decrease.

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