If you are in the market for a new water heater, you should consider installing an energy efficient water heater to take advantage of the energy efficiency tax credit. The credit for 2011 is not as good as last year, but it’s still a good incentive and the savings from an energy efficient water heater will continue for years.
If you installed your water heater in 2010, the tax credit is much more generous. For qualifying energy efficient water heaters, consumers were eligible for a tax credit equal to 30% of the cost of the water heater up to $1,500. This tax credit was set to expire at the end of 2010
Congress extended the tax credit to cover qualifying energy efficient water heaters installed in 2011, but the available tax credit has been reduced. This year, a consumer is eligible for a credit equal to 10% of the cost of the water heater and the total credit for the water heater is limited to a maximum of $300.
This tax credit includes qualifying standard gas, propane, and oil water heaters, electric heat pump water heaters, and tankless on-demand water heaters. The tax credit is a dollar for dollar reduction in your federal tax liablility for 2011.
The credit is also available for other energy efficient products such as roofing and HVAC equipment with a total limit of $500 for all energy efficient equipment installed in 2011.
Although the tax credit is not as much this year, it’s still a great deal. Water heating can account for up to 25% of a home’s energy usage. Saving 10% on an energy efficient water heater not only saves you money today, but it will help you save money on your energy bill for year after year.
