Water heater rules and incentives in 2026

The federal tax credit (25C) has ended

There is no federal tax credit for a water heater installed in 2026. The IRS: "You can claim the credit for improvements made through December 31, 2025" (IRS).

Public Law 119-21, signed July 4, 2025, ended the Energy Efficient Home Improvement Credit (section 25C) for property placed in service after December 31, 2025 (IRS FAQ). The date that matters is when the water heater was installed and put into use, not when it was bought.

A heat pump water heater installed by December 31, 2025 can still be claimed on the 2025 tax return with IRS Form 5695. Some websites and AI answers still describe a "30% credit up to $2,000" as current; for 2026 installations it is not.

Virginia's home energy rebates: not launched

Not available yet, and Virginia Energy cannot give a date. Its FAQ: "Are the Home Energy Rebates available now? No." (Virginia Energy).

Virginia has been allocated federal funding for two programs, Home Efficiency Rebates and High Efficiency Appliance Rebates. Launch depends on U.S. Department of Energy approval; Virginia Energy says it is updating its application documents after DOE program notices released May 29, 2026 (Virginia Energy).

If and when the appliance program launches, the federal cap for an ENERGY STAR heat pump water heater is up to $1,750 for income-qualified households. The appliance rebate cannot pay to replace a non-electric appliance: it is for moving from existing electric equipment to more efficient electric equipment.

Utility programs that exist today

• **Dominion Energy Virginia:** "Get a rebate of up to $500 on eligible heat pump water heaters," listed on Dominion's Virginia energy-savings page on October 7, 2026, alongside a program that pays customers to shift water-heating use at peak times (Dominion Energy).
• **NOVEC** (parts of Fairfax and Loudoun): no cash rebate for water heaters found. Its load management program cycles an enrolled electric water heater off at peak and replaces certain failed electrical parts at no charge, up to a value of $425; it does not cover replacing a leaking water heater (NOVEC).
• **Washington Gas (Virginia):** $200 or $300 for an efficient gas storage water heater and $400 for an ENERGY STAR tankless unit, installed by a contractor in its Home Energy Savings Contractor Network, which submits the rebate (read October 15, 2026; Washington Gas).
• **Columbia Gas:** no current water heater rebate was verified for this page.

Eligibility rules, qualifying models and funding change. Check with the program before you buy, and keep the model number and installation date for the application.

Maryland: EmPOWER heat pump rebates end with 2026

Pepco and BGE customers can get up to $1,600 off an ENERGY STAR heat pump water heater through EmPOWER Maryland. In-store instant coupons end October 31, 2026; mail-in rebates cover purchases through December 31, 2026 (Pepco; BGE).

• **Pepco** (most of Montgomery and Prince George's): $1,600 for an ENERGY STAR heat pump water heater; post-purchase rebates for purchases from January 1, 2024 to December 31, 2026, postmarked within 30 days; one per account (Pepco).
• **BGE**: up to $1,600, capped at the price, on similar terms, plus 75% of the cost of preparing a home to switch from gas, oil or propane, up to $1,500, through a participating contractor (BGE; BGE electrification).
• **Washington Gas (Maryland)**: $175 for an ENERGY STAR gas storage water heater and $450 for a tankless unit, installed by a contractor in its Home Energy Savings Network, with applications by December 1, 2026. These gas rebates end with 2026 (Washington Gas).
• **After 2026**: the 2027 to 2029 EmPOWER cycle is being cut; utilities were told to file 30% and 45% budget-cut scenarios (WYPR).

D.C.: DCSEU heat pump water heater rebates

The DC Sustainable Energy Utility pays $750 to $1,000 for a heat pump water heater that replaces an electric one, and $1,200 to $1,600 when it replaces gas, for installations from October 1, 2026 to September 30, 2027 (DCSEU).

• Switching from gas also qualifies for $2,000 toward an electrical panel upgrade and $400 per new circuit, up to three (DCSEU).
• The rebate requires a DOB permit and a D.C. Master Plumber, and the contractor details must match the permit (DCSEU).
• Income-qualified households can get the full switch at no cost through DCSEU's Affordable Home Electrification Program (DCSEU).
• Pepco and Washington Gas list no water heater rebates of their own in D.C. (Pepco D.C.).

The 2029 federal efficiency standards

From May 6, 2029, new electric storage water heaters over 35 gallons must meet efficiency levels that, in the Department of Energy's words, "are currently only met through use of heat pump technology." Gas storage water heaters move to a level about 95% of current models already meet. Gas tankless units are not affected (Federal Register).

• The rule is the Energy Conservation Standards for Consumer Water Heaters, published May 6, 2024 (89 FR 37778), with a compliance date of May 6, 2029 (Federal Register; DOE).
• Standards apply to water heaters manufactured from the compliance date. They do not require anyone to replace a working water heater, and a model already made can still be sold and installed.
• For gas tanks, the 2023 proposal had included condensing levels; the final rule did not adopt them.
• A separate December 2024 rule for gas tankless water heaters was withdrawn as of May 20, 2025 after Congress disapproved it.
• No delay or change to the 2029 compliance date was found on the Department of Energy's product page as of October 7, 2026.

What this means if you are replacing a water heater now

Choose the water heater on its own merits: fuel, space, venting and how much hot water you use. In 2026 no federal credit tilts the decision, and the state rebates are not yet available.

If you have an electric tank and a suitable space, a heat pump water heater is the efficient choice now and the direction the 2029 standard points. If you have gas, a new tank or a tankless unit remains available after 2029.

We install water heaters; we do not apply for rebates or tax credits on anyone's behalf. Ask for the exact model on your estimate so you can check it against any program's list yourself.