Water heating is typically the second-biggest energy user in a home after heating and cooling, and a heat pump water heater (HPWH) can cut that cost by more than half against an electric-resistance tank. The federal 25C tax credit that used to sweeten the deal expired at the end of 2025, so a 2026 purchase leans on HEAR and state/utility rebates instead. This calculator prices the honest comparison from your own household size and utility rates, and shows payback and CO₂ side by side.

Why a heat pump water heater usually wins

An electric-resistance water heater turns electricity into heat 1-to-1 — a UEF around 0.92 means you pay for almost exactly the energy you get as hot water. A heat pump water heater doesn't generate heat, it moves heat from the surrounding air into the tank, typically delivering 3 to 4 units of hot water per unit of electricity (UEF 3.0-4.0). Since it uses the same electricity meter as a resistance tank, that multiplier flows straight into your bill: often $400-$600 a year saved for a typical household.

The comparison against gas or propane is less dramatic. Gas and propane storage tanks lose a lot of heat up the flue (typical UEF 0.55-0.65), but the fuel itself is cheap per unit of heat, so a heat pump water heater usually still saves money against gas — just less, and more slowly, than against electric resistance. This calculator shows both cases plainly instead of assuming a win either way.

Which incentives survive into 2026

Federal 25C: gone. The Energy Efficient Home Improvement Credit covered heat pump water heaters under the same $2,000/year "heat pumps" sub-cap as air-source space-heating heat pumps, and it expired for property placed in service after December 31, 2025. There is no water-heater equivalent of the 25D geothermal carve-out that survives for space heating — budget $0 in federal credit for a 2026 water-heater install.

HEAR and state/utility rebates. The Inflation Reduction Act's Home Electrification and Appliance Rebates give income-qualified households point-of-sale rebates toward a heat pump water heater, administered state by state, and many utilities layer their own rebates on top. These are now the main lever on payback, so enter what you actually qualify for rather than assuming a federal credit that no longer exists.

Space, sound, and placement

A heat pump water heater pulls heat from the air around it, which cools and slightly dehumidifies that space as it runs. That's a welcome side effect in a hot garage or utility room in summer, but it can make a small, already-cool closet uncomfortably cold in winter — most manufacturers recommend at least 700-1,000 cubic feet of surrounding air, or a ducting kit that pulls intake air from (and exhausts to) a larger space.

They also run louder than a silent resistance tank — comparable to a running dishwasher or window air conditioner — which matters if the unit sits near a bedroom. None of this changes the dollar math this calculator computes, but it's worth confirming your installation location works before you commit to the purchase.