Heat Pumps Become More Affordable Under the Inflation Reduction Act

The Inflation Reduction Act (IRA) offers rebates and tax credits to encourage homeowners to make home energy upgrades, like heat pumps. These are a great way to reduce your carbon footprint, save money on your electricity bills, and help support American manufacturing jobs.

The HOMES and HEEHRA programs offer significant rebates for heat pump HVAC systems, heat pumps water heaters, and other home electrification projects. These rebates are based on household income.

Up to $8,000 in Rebates

If you’re in the market for a new heat pump HVAC system or heat pump water heater, you’re in luck. A major climate-protection bill passed last August called the Inflation Reduction Act (IRA) includes tax credits and rebates that will drastically cut your up-front costs.

Those incentives are available to low- and middle-income households through two separate programs, Home Energy Efficiency Services (HEES) and High-Efficiency Electricity Home Rebate Act (HEEHRA). The rebates cover up to 100% of the cost of a new heat pump for low-income households and 50% for middle-income ones.

The specifics of these incentives depend on a number of factors, including your household income and the program type. However, the IRA has given the Consortium for Energy Efficiency (CEE) the authority to set detailed specifications for what constitutes a heat pump that qualifies for the tax credits and rebates. They are expected to be published this summer and will likely align with Energy Star.

Tax Credits

The Inflation Reduction Act has a lot of financial incentives for families who want to take on climate change and make their homes more energy efficient. However, the upfront costs of many efficiency upgrades can be prohibitive for some households. Fortunately, the new rebate programs under IRA help cut sticker prices for heat pump HVAC systems and heat pump water heaters. And, more importantly, a large share of these rebates go to low and moderate-income households.

Besides federal rebates, state, local and utility programs also provide incentive for families to purchase efficient heating and cooling appliances. But it is important to research each program to learn more about the specific eligibility criteria and requirements.

Nate Kinsey, policy manager at the New York based home efficiency startup Sealed, explains that aligning the heat pump tax credits with Energy Star will be beneficial for consumers. It will create common reference points for efficiency and reduce the complexity of the message.

Saving Money on Your Monthly Bills

Heat pumps are more efficient than traditional fossil fuel-heavy systems, meaning they use less energy to keep homes comfortable. They also don’t produce carbon monoxide, a serious respiratory health issue that has been linked to asthma rates. Additionally, they require far less maintenance than combustion heating systems, making them a smart choice for people looking to lower energy bills.

The IRA offers rebates and tax credits to help Americans cut their heating and cooling costs with more efficient energy appliances like heat pumps. These incentives make it possible for more homeowners to fight climate change, and save money in the process.

However, the IRA rebates will only cover the cost of qualifying energy-saving appliances. Many states have their own state-wide programs that offer rebates for ENERGY STAR-certified appliances, including heat pumps. Meres notes that many of these state rebates are targeted toward low- and middle-income households, and will begin rolling out later this year. Some of these rebates will include point-of-sale discounts for heat pumps.

Environmentally Friendly

Whether powered by fossil fuels or renewable energy, heat pumps are much more environmentally friendly than other types of appliances. Depending on where you live, switching to an air-source heat pump can cut greenhouse gas emissions from heating by about 75 percent compared to a natural gas furnace. This reduction is even higher if your electricity comes from cleaner sources such as wind and solar power.

And, like air conditioners, heat pumps operate quietly. They also provide the flexibility of individual room temperature control and can help lower energy bills by reducing demand. Homeowners should make sure to air seal and insulate before making a heating system investment to maximize energy savings.

Heat pumps’ high energy efficiency, low operating costs and climate benefits mean they can play a crucial role in reducing fossil fuel use in buildings. However, barriers such as higher upfront costs and limited availability of trained installers need to be addressed. Governments and industry have a vital part to play in supporting consumers and overcoming these barriers.