1. Money

Before You Buy a Water Heater

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Tax credits are available for many types of home improvements including high efficiency heating equipment. Before you buy a new water heater, you need to see if yours qualifies for a tax credit.
The maximum amount of homeowner credit for all improvements combined is $500 during the two year period of the tax credit. This tax credit applies to improvements made from January 1, 2006 through December 31, 2007.

Gas, Oil, and Propane Water Heaters

To qualify, the water heater must have an energy factor of 0.8. This is over 33 percent more efficient than the current federal standard. Only some tankless water heaters currently qualify.

The water heater must have an accompanying Manufacturer's Certification Statement in order to qualify.

Qualifying homeowners are eligible for a $300 tax credit for this appliance. The $300 credit is subject to the $500 maximum allowable credit for each household.

Electric Water Heaters

To qualify, the water heater must have an energy factor of 2.0. This is more than twice as efficient as the current federal standard.

The water heater must have an accompanying Manufacturer's Certification Statement in order to qualify.

Qualifying homeowners are eligible for a $300 tax credit for this appliance. The $300 credit is subject to the $500 maximum allowable credit for each household.

Solar Water Heaters

To qualify for the solar water heater tax credit at least half of the energy generated by the "qualifying property" must come from the sun. Homeowners may only claim spending on the solar water heating system property, not the entire water heating system of the household.
The system must be certified by the Solar Rating and Certification Corporation (SRCC).

Heaters for pools and hot tubs are not eligible.

Qualifying homeowners are eligible for a credit of 30 percent of the cost up to $2000.

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