California Tankless Water Heater Tax Credits: 3 Things Homeowners Must Know

california tankless water heater tax creditWith our area’s famous Mediterranean climate, we get hot and dry summers, but winters that are somewhat wet and chilly. Now, there are all kinds of debate around here about which season is the best. While I generally hate taking sides in such heated (get it?) arguments, I have to say that this year I’ve really been enjoying our winter, which—fingers crossed—hasn’t been nearly as rainy as last year’s epic monsoon season. I’ve been lucky enough to do my fair share of hiking, hitting the trails everywhere from Auburn to the Bay Area to Lake Tahoe. As you probably already know, the views on all of these great Sacramento area hikes are really amazing—almost as amazing as the super hot and relaxing showers that you get to take after you come home fresh off of finishing one of them.

Now, I’ve made sure I have a tankless water heater installed at home waiting for me to heat my water instantly as soon as I am in the door, which means that I never have to wait for my shower to warm up. I also never have to worry that I’m going to use up all the hot water, or that someone else will use it all before I get a chance to hop in the tub. Tankless water heaters are one of my favorite things in the world; I am a plumbing professional after all.

Recently, though, a buddy of mine mentioned that while tankless water heaters sound great, he didn’t want to invest in one because he was worried about how much they cost. That was my cue to introduce him to California’s tankless water heater tax credit opportunities. It’s sometimes easy for me to forget that most homeowners are more like my friend than they are like me, at least when it comes to knowing the type of home upgrades that they can use to earn tax credits. There are plenty of HVAC tax credit and rebates out there, but today I want to focus on three things everyone should know about one of my favorites: the California tankless water heater tax credit.

No. 1: What Is the California Tankless Water Heater Tax Credit?

Before we get into what exactly the California tankless water heater tax credit is, it’s important to touch base on what a tankless water heater is, as well as what the primary benefits of having one are.

california tankless water heater tax creditSimply put, a tankless water heater is exactly what it sounds like—a water heater that heats water without needing to use a storage tank. Basically, when you turn your hot water on in your shower or at your sink, cold water travels through a pipe and enters the unit where a gas burner or electric element immediately heats it up, giving your home a constant, indefatigable supply of hot water.

I’ve talked in the past about tankless water heater common misconceptions, and these are worth knowing, for sure, but today I want to get into three of my favorite things about having one of these in my home:

  • Comfort: One of the main benefits of a tankless water heater is that it provides instant and continuous steaming hot water. If you have a big family or roommates, you don’t have to worry about running out of hot water after coming in from a nice long hike on a cold day.
  • Savings: Tankless water heaters tend to be between 24 and 34% more efficient than their conventional counterparts, according to And a more efficient appliance means a lower utility bill because your water heater will use less fuel to get your showers hot.
  • Longer lifespan: Conventional water heaters have a lifespan of between 10 and 15 years. Tankless water heaters, however, regularly last up to 20, making them a great investment over time.

A tankless water heater tax credit is also exactly what it sounds like: a credit on your taxes that you can get back for installing a tankless water heater in your home. And, we’re fortunate to be eligible for it through our California state taxes.

No. 2: Who Is Eligible for California’s Tankless Water Heater Tax Credit?

This answer is going to be short and sweet. Not everyone who lives in California is eligible for a tankless water heater tax credit, even if they buy a tankless water heater. In order to qualify, a homeowner has to be replacing a conventional tank-type water heater with the tankless water heater variety.

The reason for this is that this tax credit is part of the state’s efforts to reward its residents for investing in equipment that is more energy efficient. A tankless water heater qualifies because it uses less energy than its more traditional counterpart as it only heats water that is being used. A tank-type water heater, on the other hand, keeps a tank filled with heated water so that it’s ready when someone starts to use it, which necessitates burning continuous energy.

No. 3: How Much Is a California Tankless Water Heater Tax Credit Worth?

Homeowners can receive a rebate of up to $200 on Energy Star-certified natural gas tankless water heater systems.

Now let’s get to the part that I’m sure every homeowner is the most anxious to hear about: exactly how much they’ll save on their taxes by making an investment in a tankless water heater. Homeowners can receive a rebate of up to $200 on Energy Star-certified natural gas tankless water heater systems. I say up to because there are variations in savings here, such as:

  • Energy Star-certified natural gas tankless water heaters that feature an energy factor of 0.90 or higher earn a $200 credit
  • Other high-efficiency models with a minimum energy factor of 0.82-0.89 result in a rebate of $150

It should also be noted that in 2017 the state offered an additional $100 credit for tankless water heater units purchased between August 1 and December 31 because not enough homeowners had taken advantage of the program, which enabled some folks that I know to save up to as much as $300 on making the jump from tank to tankless water heaters.

While you may have already read my tips for how to pick a tankless water heater for your home, now you also know how to factor in the size of the rebate you’ll get. Really, I think the only thing that’s left is for you to contact an experienced plumbing service company, like Bell Brothers, that can help you through the entire rebate and installation process.

Our experienced plumbing experts can make sure you get the perfect fit and model for your home while also helping you to maximize the size of your tax credit and savings. You’ll definitely thank me the first time you get into your instantly hot shower and also realize that your new setup is saving you money.

Stop wondering about California tankless water heater tax credit questions. Contact the experienced plumbing professionals at Bell Brothers today for all the answers you need to make a sound financial decision.

Wondering how to finance that new plumbing or water heater? HERO is a unique financing option that helps California homeowners afford energy efficient upgrades to their home. Contact Bell Brothers, a HERO-approved contractor, to learn more. Our local HVAC, plumbing, and window specialists will walk you through the entire process, from applications to installation.

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