Home Energy Savings - Pleases Your Pockets And The Earth

Tankless water heater tax credit

Tax break, rebate and incentives

Attention American homeowners, the tankless water heater tax credit is back. The Energy Policy Act of 2005, passed by President Bush, enacted the first federal tax credit for eligible gas tankless hot water heaters.

But the tankless water heater tax credit expired in 2007. With the 2009 Emergency Economic Recovery and Stabilization Act signed into law by President Obama, the tax credits have been reenacted, extended and increased.

How it works

The tax credit isn't rewarded at the actual time of purchase. Instead the purchase is claimed on your federal income tax. Then the tankless water heater tax rebate is rewarded to you, increasing your tax refund or otherwise decreasing your yearly tax payment.

Tankless water heater tax incentives as of 2009

  • It's extended until December 31, 2010.
  • The credit percentage has been increased from 10% up to 30%.
  • The original maximum tax rebate was $500, the 2009 maximum rebate has been increased to $1,500.  


  • All energy star certified gas tankless hot water heaters qualify.
  • Electric tankless units do not qualify, gas powered tankless units can be powered by either natural gas or propane.
  • Tax credits only apply for existing homes.
  • Purchase and installation must be preformed by December 31, 2010.
  • Proof of purchase and installation costs are required for tax purposes.

Local tankless water heater rebates

It's important to note that a federal tax credit is not a rebate. Mail in rebates and instant rebates are redeemable immediately after purchase.

With that said, keep in mind that several local utility providers (in partnership with manufactures) offer cash rebates for the purchase of several qualified tankless hot water heaters.

It's a good idea to check with your local utility provider and coordinate your purchase in order to combine your cash rebate with your tankless water heater tax break.

More on tankless hot water heaters


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