Your Old Water Heater Could Be Banned in 2029: Here’s What You Need to Know About New Efficiency Standards and Available Rebates
If your water heater is more than a few years old, you may be facing a major decision sooner than you think. The Department of Energy has finalized new efficiency standards for residential water heaters that will take effect on May 6, 2029, and these changes could dramatically impact your options for replacement.
What Water Heaters Will Be Affected?
Water heater efficiency standards do not ban gas-powered water heaters. Instead, they make sure that water heaters that burn gas incorporate the latest cost-effective technology to make sure the water heaters aren’t wasting energy. However, the impact on different types of water heaters varies significantly.
Electric storage water heaters greater than 35 gallons will require heat pump technology. This means if you currently have a traditional electric resistance water heater larger than 35 gallons, it will no longer be manufactured after May 2029. All nominal 40-gallon electric storage units that are currently rated at 36 or 37 gallons will have to be reduced to 35 gallons.
For gas water heaters, the changes are more modest. The standards will require minor updates to gas-fired storage water heaters, with atmospheric gas units requiring the addition of dampers for improved efficiency.
Why These Changes Are Happening
Water heating is responsible for roughly 13% of both annual residential energy use and consumer utility costs, making it a significant target for energy efficiency improvements. DOE said the energy savings from the final rule will generate more than 17.6 quadrillion British thermal units of energy savings over 30 years, “the largest savings ever from a single DOE efficiency standard”.
Replacing common-sized traditional electric resistance storage water heaters with electric heat pump water heaters meeting the new standards would save consumers approximately $1,800 on their utility bills, on average, over the life of the appliance.
What Rebates and Tax Credits Are Available?
The good news is that significant financial incentives are available to help offset the cost of upgrading to a qualifying high-efficiency water heater. The rebate comes from the Energy Efficient Home Improvement Credit, part of the Inflation Reduction Act of 2022. This federal program allows homeowners to claim 30% of the costs, up to $2,000 annually, for qualified water heater upgrades, including both equipment and installation.
The 25C Heat Pump Water Heater tax credit may cover up to 30% of your heat pump water heater project costs, capped at $2,000, but homeowners need to act quickly as this credit expires on Dec. 31, 2025.
Heat pump water heaters that have earned the ENERGY STAR are eligible for this credit. Additionally, costs of electrical components needed to support residential energy property, including panelboards, sub-panelboards, branch circuits, and feeders, also qualify for the credit if they meet the National Electric Code and have a capacity of 200 amps or more. There is a limit of $600 per item.
Beyond federal incentives, rebate and incentive programs provide cash-back to consumers for the purchase of water heaters that meet certain energy efficiency standards, with many utility companies offering additional local rebates.
Planning Your Water Heater Replacement
If you’re considering a water heater upgrade, timing is crucial. While the new standards don’t take effect until 2029, the federal tax credits expire much sooner. For Massachusetts residents looking for professional installation and service, working with an experienced local contractor is essential.
When searching for water heater replacement near me, it’s important to choose a company with extensive experience in both traditional and high-efficiency water heating systems. For over 30 years, families across Massachusetts have trusted companies like Dempsey Energy to provide reliable HVAC, plumbing, and energy solutions.
At Dempsey Energy, we understand that your home’s comfort depends on reliable North Attleboro HVAC, plumbing, electrical and energy systems. With fast, same-day repairs, fully stocked trucks, and 24/7 emergency services, we’re here when you need us most. This level of service is particularly important when navigating the complexities of new efficiency standards and available incentives.
What You Should Do Now
Don’t wait until 2029 to start planning. If your current water heater is aging or showing signs of wear, now is an excellent time to explore your options. Compliance will be required starting in 2029 for the new standards adopted today, which would result in over 50% of the newly manufactured electric storage water heaters to utilize heat pump technology, compared to 3% today.
Start by having a professional assess your current system and discuss whether you might benefit from upgrading to a high-efficiency model before the standards take effect. This approach allows you to take advantage of current rebates and tax credits while ensuring you’re ahead of the curve when the new regulations become mandatory.
The transition to higher efficiency water heaters represents both a challenge and an opportunity. While some older units will no longer be available, the combination of improved technology and substantial financial incentives makes upgrading an attractive option for many homeowners. By planning ahead and working with experienced professionals, you can ensure a smooth transition that saves money and improves your home’s energy efficiency.