Maximize Your Savings: Combining Rebates & Tax Credits

By Owner Access | June 20, 2023

Energy-Efficiency, Heat Pump Water Heaters, Home Improvements,
Inflation Reduction Act, Rebates
Maximize Your Savings: Combining Rebates & Tax Credits

If you know your water heater is operating on borrowed time (8+ years old), or you want to plan home improvements over the next few years to maximize your tax credits, Hot Water Now! will help you through the process. An easy place to start is to combine Xcel Energy or United Power rebates with Tax Credits from the Inflation Reduction Act of 2022. By taking advantage of both programs, you can significantly reduce the cost of a new electric heat pump water heater while also doing your part to protect the environment.

If you’re like most people, the thought of saving money on your utility bills is appealing. What’s even better is getting paid to save energy and help the environment! That’s where stacking energy-efficient appliance rebates, tax, and bill credits shine. Live in the City and County of Denver and stack more savings with Denver’s Climate Action Rebates. Check your county and local municipalities for additional local rebates and tax incentives.

We’re here to help! Ready to upgrade your old tank right away, or start with an estimate so you can plan your home improvement projects to maximize tax savings? We’re Xcel Trade Partners, and Denver CASR-approved contractors and have specialed in installing water heating systems in Colorado since 2006. Call or visit Hot Water Now! We’ll send out an expert to review your project and upgrade you to state-of-the-art equipment.

Xcel Energy Rebate: Electric Heat Pump Water Heater

  • Expected Energy Savings Over Average Equipment Lifetime: Up to $900 over 12 years
  • Rebate: $600
  • Qualifying Equipment

Xcel Energy Rebate: Smart Electric Heat Pump Water Heater

In order to qualify for the $800 rebate, the water heater must be eligible for the Smart Water Heater program. Models that are not eligible qualify for the $600 rebate.

The Inflation Reduction Act is full of incentives to go electric. But there’s a lot to explore and understand and Rewiring America is a great guide and rebate calculator.

Tax Credits: Federal Government – Inflation Reduction Act of 2022

Heat Pump Water Heaters 01/01/2023 – 12/31/2032

30% Tax Credit of cost up to $2,000

The federal government offers a tax credit on the purchase and installation of Heat Pump Water Heaters. Offer valid 01/01/2023 through 12/31/2032

Look to EnergyStar.gov for information on Heat Pump Water Heater Incentives

Annual Limits on Energy-Efficient Home Improvement Tax Credits

In addition to limits on the amount of credit you can claim for any particular equipment installation or home improvement, there are annual aggregate limits. The overall total limit for an efficiency tax credit in one year is $3,200. This breaks down to a total limit of $1,200 for any combination of home envelope improvements (windows/doors/skylights, insulation, electrical) plus furnaces, boilers, and central air conditioners. Any combination of heat pumps, heat pump water heaters, and biomass stoves/boilers are subject to an annual total limit of $2,000.

Who can use this credit?

Principal Residence Owners. Must be an existing home & your principal residence. New construction and rentals do not apply. A principal residence is the home where you live most of the time. The home must be in the United States. It can include a house, houseboat, mobile home, cooperative apartment, condominium, and manufactured home.

How can I maximize my tax credits?

Given how the annual aggregate limits are structured, it may be prudent to spread your improvements over a few years.

If your heating or cooling system is old, and you are considering a new air source heat pump, it is always wise to optimize your attic insulation first, so you don’t pay for more heating and cooling than you actually need. Making these upgrades together in one year would allow you a tax credit of up to $1,200 for the insulation and up to $2,000 for the heat pump. Similarly, you could combine a heat pump installation with window/door replacements. In that scenario, the $2,000 credit for the heat pump could be combined with tax credits up to $600 total for the windows/skylights plus $500 for two or more doors. If you replace your water heater the following year, you would be eligible for another 30% tax credit, up to $2,000 plus up to $600 if you need an electric panel upgrade to accommodate the new water heater.

Upgrade your home with Denver’s Climate Action Home Energy Rebates!

  • Heat pump water heaters: 60% of the project cost, up to $1,000
  • Smart heat pump water heaters: 60% of the project cost, up to $1,750

Learn more about Denver’s home energy rebate program.

The product must be a High Efficiency or Smart/Connected Heat Pump Water Heater listed on Xcel’s approved product list. Please consult with an Xcel Certified Contractor to find out which model is a good fit for your home.

  • High-Efficiency Heat Pump Water Heater
    • Rebate MAX – $1,000 not to exceed 60% of the total cost.
  • Smart/Connected Heat Pumper Water Heater: Equipment must be eligible for Xcel’s Smart Water Heater Program. Rebates cannot exceed 60% of total cost.
    • Rebate MAX – $1,750, not to exceed 60% of the total cost.

We recommend submitting product specifications and either the AHRI or NEEP Certificate, with the Pre-application contract. We will review those documents and let you know if the equipment doesn’t meet the requirements listed above.

United Power Electric Water Heating Rebates

Please check with United Power’s Energy Management team for details and requirements before purchasing.

  • Water Heater – new construction $120
  • Water Heater – fossil fuel to electric conversion $100
  • Water Heater – on United Power utility control $200
  • Heat Pump Water Heater $20

The minimum size of all units is 2.5 kW and 30 gallons. Must have R-16 manufacturer insulation or equivalent. This applies to both new and replacement units. Must meet minimum DOE energy factors. Plastic or stone-lined lifetime product. Rebates must be requested within 90 days of installation. An invoice detailing equipment brand, model number, and itemized pricing for equipment and labor costs to help determine the rebate amount, is required with the rebate application.

*Rebate limit ONE wired tank on two tank GSHP desuperheater configuration.

*United Power no longer offers an electric-to-electric water heater rebate.

Posted in Water Heater Tips