Water heater efficiency rules and rebates: where to start

What "energy efficient" means for a water heater

Every residential water heater sold in the U.S. carries a UEF, or uniform energy factor. It is the result of DOE's standard test, and it is printed on the spec sheet and the yellow EnergyGuide label. Higher is better. A UEF of 0.92 means the heater turns roughly 92% of the energy it uses into hot water at the tap over the test. A heat pump can score above 1.0 because it moves heat from the room air instead of making it.

Two other numbers matter for comfort, not efficiency: the first-hour rating for tanks and the GPM at a given temperature rise for tankless units. See our UEF, first-hour rating and GPM guide.

Tank heaters also lose heat while they sit. DOE's Building America guide estimates a standard atmospheric gas tank burns about 40 therms a year just keeping the tank hot^[6]. That standby loss is a big reason efficient models cost less to run.

Which types are most efficient

Using ENERGY STAR floors for certified models and the federal minimums for standard ones:

Type	Typical efficiency level	Notes
Heat pump (hybrid) electric tank	ENERGY STAR: UEF 3.30 or more; 2.20 or more for 120 V plug-in and split units[1]	Needs room air, a condensate drain and space
Solar with electric backup	ENERGY STAR: solar UEF 3.00 or more[1]	Depends on climate and roof
Gas tankless	ENERGY STAR: UEF 0.95 or more[1]; federal minimum 0.80 to 0.81[2]	No standby loss; sized by GPM
Condensing or high efficiency gas tank	ENERGY STAR: UEF 0.81 to 0.86[1]	Needs venting and a condensate drain
Standard electric tank	Federal minimum about 0.92 for a 50 gal medium-draw unit[2]	No combustion; highest energy use per gallon
Standard gas tank	Federal minimum about 0.58 for a 40 gal medium-draw unit[2]	Standby loss through the flue

The "about" figures are our arithmetic from the federal formulas in 10 CFR 430.32^[2]. Running cost depends on your local price of electricity versus gas, not only on UEF. For a fuel-by-fuel view, see gas vs electric and heat pump vs standard electric.

The guides in this section

• DOE water heater rules: what changes and when. The 2024 federal standard, the May 6, 2029 compliance date, what happens to electric and gas tanks, and why the gas tankless rule was cancelled.
• Federal tax credit (25C) status. Why the 30% credit ended for 2026 installs and what still applies to 2025 installs.
• ENERGY STAR water heaters. The exact UEF, flow and warranty levels, how they compare with federal minimums, and how to check a model.
• Utility rebate pages. Program details by utility, listed below.

The rules in one minute

DOE finalized new standards for consumer water heaters in 2024. Units made on or after May 6, 2029 must comply^[3]. The big change is for electric tanks of 20 to 55 gallons: their minimum UEF becomes 2.30, a level only heat pump models reach^[2]. DOE expects more than 50% of new electric storage water heaters to use heat pumps as a result, compared with 3% when the rule was finalized^[4]. Gas tanks see what DOE calls "a moderate increase in efficiency"^[4]. That is not a ban on gas.

A separate DOE rule for gas tankless units was withdrawn as of May 20, 2025, after Congress disapproved it^[3]. As of October 6, 2026, DOE's status page still lists the May 6, 2029 date for the storage rule^[3].

Tax credits: gone for 2026 installs

Many websites still promise a 30% federal tax credit on an efficient water heater. That was the 25C credit, and the IRS says it is not allowed for property placed in service after December 31, 2025^[5]. If you installed a qualifying unit in 2025, you may still claim it on your 2025 return. Details are on our 25C status page.

Rebates that still pay in 2026

With the federal credit gone, rebates now come from utilities and some state programs. They vary a lot by location, and most require an ENERGY STAR model. What we confirmed at the source:

Utility	Water heater rebate status	Source
Austin Energy (TX)	$1,000 for an ENERGY STAR hybrid or heat pump unit, 40 gal or more, replacing a unit 10+ years old; apply within 90 days	[7]
ComEd (IL)	$750 for an ENERGY STAR heat pump unit bought July 1 to December 31, 2026; more for income-eligible customers	[8]
Nicor Gas (IL)	$225 for an ENERGY STAR gas tank with UEF .86 or higher; $150 for an ENERGY STAR tankless with UEF .95 or higher; installed in 2026	[9]
Columbia Gas of Ohio	Residential efficiency programs have ended, except the income-qualified WarmChoice program	[10]
CPS Energy (San Antonio)	No water heater rebate listed on its current residential rebate page	[11]

Programs change during the year and some run out of funding. Check the utility's own page before you buy, and keep the invoice and model number.

Utility pages in this section (some are still being written):

• Illinois: ComEd, Nicor Gas, Peoples Gas, Ameren Illinois
• Ohio: AEP Ohio, Duke Energy Ohio, Enbridge Gas Ohio, Columbia Gas of Ohio
• Texas: Oncor, CenterPoint Energy, Atmos Energy, Austin Energy, CPS Energy

How to choose without overpaying

1. Start with fuel and space. Do you have gas? Is there room and air volume for a heat pump? Is there a 240-volt circuit?
2. Size first, then efficiency. An efficient heater that runs out of hot water is a bad buy. See what size water heater do I need.
3. Compare UEF within the same type and size. The ENERGY STAR product finder lists certified models with their ratings.
4. Subtract rebates, not tax credits. Use only rebates you have confirmed with your utility.
5. Check the install cost. Venting changes, new circuits and condensate drains can add more than the efficiency saves in the first years. See tank vs tankless and our replacement cost guide.

When to call a pro

• To check whether a heat pump or condensing unit fits your space, venting and electrical setup.
• To size a tankless unit by GPM and your local groundwater temperature.
• To get the model number, invoice and permit details a rebate requires.