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Federal Tax Credit

The Energy Policy Act of 2005 provides valuable federal tax credits for consumers and contractors who make energy-efficiency upgrades to their homes or install this type of equipment during new construction. Homeowners or renters who have energy-efficient products in their facility enjoy multiple benefits. At home, these benefits include lower home energy bills, increased indoor comfort, and reduced air pollution. In addition to helping savvy consumers lower their energy bills, the energy-efficient products are eligible for new federal tax credits, which actually lower the amount of federal income taxes that homeowners or homebuilders must pay our government or "Uncle Sam".

You can get a one-time tax credit of up to $500 in total for installing efficient new windows, insulation, doors, roofs, and heating and cooling equipment, including water heaters, in your home.

When are they available?

The home improvement tax credits apply for improvements "placed in service" from January 1, 2006, through December 31, 2007. They are not available in 2005. The IRS defines "placed in service" as when the products or materials are ready and available for use - this would generally refer to the installation, not the purchase.

Criteria for heating and cooling equipment

In order to be eligible for the tax credit, heating and cooling equipment must meet specified measures of energy efficiency:

• Natural gas, propane, or oil water heaters must have an energy factor (EF) of at least 0.80. This is about 20 percent more efficient than the current federal standard. Only some tankless water heaters currently reach this efficiency level.

For more information on the federal tax credits visit Energy Star and Energy Policy Tax Incentives Act of 2005. Energy Efficient Home Credit. 8908. Form

Cost Benefits

Many customers find our site because they need to replace a conventional storage type water heater and have heard about modern on-demand water heaters. Tankless water heaters are rapidly growing in popularity because they offer performance and cost benefits over their conventional counterparts.

Save Money in Utility Bills

Tankless waters are more energy efficient than conventional heaters because they heat water as it is needed. Storage type water heaters have to keep water hot 24 hours per day which results in standby energy losses. The amount you can save on your energy bills depends on how much hot water you use. "For homes that use 41 gallons or less of hot water daily, demand water heaters can be 24%-34% more energy efficient than conventional storage tank water heaters. They can be 8%-14% more energy efficient for homes that use a lot of hot water-around 86 gallons per day. You can achieve even greater energy savings of 27%-50% if you install a demand water heater at each hot water outlet." (www.energy.gov/taxbreaks.htm)

Save Space

Tankless water heaters are considerably smaller than storage type water heaters. An average conventional heater is about 60" tall, 22" wide, and 22" deep. The average tankless water heater is about 25" tall, 14" wide, and 10" deep. Tankless water heaters are generally wall-mounted which can save even more space.

Continuous Hot Water

Many of us have had the unfortunate experience of running out of hot water while taking a shower. This occurs when the supply of hot water within the conventional storage tank runs out. Customers with custom shower systems with multiple shower heads and body sprays probably know this better than anyone; they can potentially benefit the most from installing tankless water heaters, which never run out of hot water. It is important to note however that a tankless water heater can only supply so much; selecting the correct unit for your application is very important. Please see "How do I choose?" in the related articles.

Maximum Cost Efficiency

We have so far learned that tankless waters use less energy than conventional storage type heaters which will save you money every month. It is also important to look at the big picture: tankless water heaters will save you money over time. Here is an explanation of how:

The average 40 gallon storage tank will last 13 years, has an initial cost of $380, and uses $179 in fuel per year. An average whole house tankless water heater will last 20 years, have an initial cost of $800, and will use $90 per year to operate. This breaks down to a per year operating cost of $208.23 for the convention heater; and $130 for the modern on-demand tankless water heater. When you take those savings over the life the heater; the cost savings are even more attractive.

Environment Friendly

The energy efficiency and life expectancy of tankless water heaters make them very eco-friendly. With energy demands readily increasing, steps toward better energy efficiency are very important.