Heat Pump Water Heater ROI Calculator
Compare a heat pump water heater (HPWH) against a gas or electric resistance water heater. Uses stored state-average electricity and gas prices and shows a 15-year cumulative cost comparison. No federal credit or state rebate is subtracted automatically.
50 gal · UEF 3.5 · $1,700 installed
UEF 0.62 · Fuel: Natural Gas · $900 installed
Federal 25C HPWH Credit — Expired Dec 31, 2025
The federal 25C heat pump credit expired December 31, 2025. It is not available for 2026+ installations. If a qualifying HPWH was placed in service in 2025, the 30% credit (up to $2,000) may still be claimed on your 2025 tax return. State HEEHRA rebates may still apply depending on your state and income — the HEEHRA program offers up to $1,750 for HPWHs for income-qualified households.
Figures below reflect 2026 installs with no federal 25C credit applied. If you installed in 2025, subtract any credit you are eligible to claim from the net cost. Consult a tax professional.
How this calculator works
1. Hot-water heat. Annual heat delivered = gallons per day × 365 × 8.34 lb/gal × 67°F. The 67°F rise matches the U.S. Department of Energy test conditions used to rate Uniform Energy Factor (UEF): 58°F inlet water heated to 125°F. Using the same rise keeps the result consistent with how each heater's efficiency was measured. The default of 64 gallons a day is editable.
2. Energy by heater type. Electricity (kWh) = heat ÷ 3,412 BTU/kWh ÷ UEF. Gas (therms) = heat ÷ UEF ÷ 100,000 BTU/therm. Annual cost multiplies that energy by your state's stored average price, and the 15-year chart escalates electricity and gas prices by the rates you enter.
Worked example (defaults, stored national averages of 18.34¢/kWh and $1.58/therm). 64 gallons a day needs about 13.1 million BTU a year. A 50-gallon HPWH (UEF 3.5) uses about 1,093 kWh, or $200 a year. A standard gas tank (UEF 0.62) uses about 211 therms, or $333 a year, so the HPWH saves about $132 a year and recovers the $800 planning cost difference in about 6.1 years. Against an electric-resistance tank (UEF 0.93, about 4,114 kWh or $754 a year), the saving is about $554 a year and the payback about 1.7 years.
Emissions. CO₂ uses the EPA eGRID2023 U.S. average of 0.7715 lb per kWh for electricity and 11.7 lb per therm for natural gas. Your local grid may be cleaner or more carbon-intensive than the national average.
What this model leaves out. UEF is measured under standard test conditions. Real HPWH efficiency falls in cold spaces and when the backup resistance element runs during heavy use. The model does not count the extra space-heating load in winter (or the cooling benefit in summer) when the unit sits in conditioned space. Installed costs are planning assumptions: electrical work, condensate drainage, and venting changes vary by home. No federal credit or state rebate is subtracted. Use local quotes and your own hot-water use to decide.
Frequently Asked Questions
How does a heat pump water heater work?
A heat pump water heater (HPWH) uses a refrigerant cycle to move heat from the surrounding air into the tank instead of generating heat with a resistance element. ENERGY STAR heat pump models are rated at a UEF of about 3 or higher, versus roughly 0.9 to 0.95 for electric-resistance tanks, so they use about a third or less of the electricity for the same hot water. Most also have a resistance element for high-demand periods, which uses more energy when it runs.
Where should a heat pump water heater be installed?
Manufacturers commonly specify a minimum volume of surrounding air (often about 700 to 1,000 cubic feet) or a ducted installation, plus an operating temperature range; check the installation manual for your model. The unit exhausts cool, dehumidified air, which helps in summer but adds to the heating load in winter if it sits in conditioned space. It also needs a condensate drain, and many models need a dedicated 240-volt circuit, although 120-volt models exist.
What incentives apply to HPWHs in 2026?
The federal Section 25C credit, which covered 30% of a qualifying heat pump water heater up to $2,000 per year, is not available for property placed in service after December 31, 2025. The federal Home Energy Rebates program authorizes HEAR rebates of up to $1,750 for an HPWH for income-qualified households, but availability depends on whether your state's program is open and funded, so check your state energy office. This calculator does not subtract any rebate automatically.
Is a heat pump water heater worth it vs. a gas water heater?
It depends on your gas and electricity prices, hot-water use, and the installed-cost difference. With this calculator's defaults (64 gallons a day) at the stored national averages, a 50-gallon HPWH costs about $200 a year to run versus about $333 for a standard gas tank, a difference of about $132 a year and a simple payback of about 6.1 years on the $800 planning cost difference. Higher electricity prices or lower gas prices lengthen payback; replacing an electric-resistance tank usually pays back faster.