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Ditching your old water heater can save you nearly $3,000 — here's how to make the switch

Thanks to the Inflation Reduction Act, you may be eligible for a tax credit of up to $2,000.

Thanks to the Inflation Reduction Act, you may be eligible for a tax credit of up to $2,000.

Photo Credit: iStock

Our water heaters are unfortunately sneaky appliances, secretly accounting for almost 20% of our home's energy use. 

This amounts to hundreds of dollars each year — all for an appliance that we tuck away in a basement or closet and rarely ever think of. 

But it doesn't have to be that way. If your current water heater is reaching the end of its lifespan (more on that in a bit), there are a ton of reasons to consider a heat pump water heater as a replacement — starting with the fact that this appliance could save you nearly $3,000 over its first 10 years. 

What is a heat pump water heater?

Unlike traditional water heaters, which typically generate heat from using gas or electricity, heat pump water heaters warm your water by capturing heat from their surroundings and moving it into the tank. 

🗣️ Which of these factors would most effectively motivate you to buy a heat pump?

🔘 Lower energy bills 💰

🔘 Better temperature control 🌡️

🔘 Helping the planet 🌎

🔘 I'd never buy a heat pump 🚫

🗳️ Click your choice to see results and speak your mind

It's a strange-sounding process that yields some shocking results — by many estimates, these appliances are three to five times more efficient than traditional ones. It's similar to how standard heat pumps, which are surging in popularity in many states, can work to heat and cool homes way more efficiently. 

If these devices sound high-tech, it's because they are. And they come with a matching price tag. The one downside is that, upfront, they're typically more expensive than a traditional water heater (usually in the $1,500 to $3,000 range), but you'll earn back your investment and then some in savings. 

How will it save me money? 

This is where that efficiency comes in. On average, a heat pump water heater will save you around $330 a year just by doing its thing. That goes a long way in an era when utility bills have risen steadily over the past five years. 

And on top of the yearly savings, the government will literally pay you for buying one. Thanks to the Inflation Reduction Act, you may be eligible for a tax credit of up to $2,000, with an upfront discount of up to $1,750 — in some cases that could basically cover the upfront costs. 

You'll have saved around $2,800 over 10 years when everything's said and done. But it's possible that the savings train will keep on rolling since many heat pump water heaters last longer than their gas-powered counterparts.

When should I consider getting one?

The short answer is: not until you need it. 

Water heaters can last for varying amounts of time, but conventional wisdom says it's worth making a change around the 10-year mark. Anything longer, and you'll run the risk of a pretty ugly household disaster (think: 50 gallons of water or more flooding out onto the floor). 

Another tip? Keep an eye on your monthly energy bills. If your costs go up unexpectedly, it could be a sign that your water heater is struggling and is ready to be replaced. 

From there, it could be time to consider a heat pump water heater. Making the switch before something goes haywire could save you even more money (and some headaches). 

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