The tankless water heater tax credit California homeowners could claim has ended: the federal 25C credit stopped for any property placed in service after December 31, 2025. SoCalGas still pays a rebate of $80 to $1,500 for a high-efficiency tankless unit that replaces a tank-type unit in a single-family detached home. DuloCore checked the IRS and SoCalGas pages on November 2, 2026.
For every utility offer across the state, start with our guide to California water heater rebates.
Is There a Tax Credit for a Tankless Water Heater in 2026?
The federal 25C credit ended for any property placed in service after December 31, 2025, so a tankless water heater installed in a California home in 2026 earns zero federal credit.
The cutoff comes from Public Law 119-21 (July 4, 2025), and the IRS explains the end date in its FAQ.
Californians who installed a unit in 2026 can also read about the other federal home energy tax credits that ended.
What Did the Tankless Water Heater Tax Credit Pay Before It Ended?
Before it ended, 25C paid 30% of qualified expenses, capped at $600 per item for a natural gas, propane or oil water heater in the CEE highest efficiency tier.
The cap applied per item, and the unit had to meet the Consortium for Energy Efficiency (CEE) highest efficiency tier, not counting any advanced tier. Heat pump water heaters sat in a separate, larger group, as the IRS home improvement credit page shows. California homeowners could claim either cap only for improvements made through December 31, 2025.
| Water heater type |
IRS group |
Credit cap |
Status |
| Natural gas, propane or oil |
CEE highest efficiency tier |
$600 per item |
Ended December 31, 2025 |
| Electric or natural gas heat pump |
Heat pumps and water heaters |
$2,000 per year |
Ended December 31, 2025 |
What Still Lowers the Cost of a Tankless Water Heater in California?
SoCalGas pays a rebate of $80 to $1,500 for a high-efficiency tankless water heater that replaces a tank-type unit in a single-family detached home.
The unit must appear on the ENERGY STAR qualifying list, according to the SoCalGas rebates page. SoCalGas also pays $300 to $575 for a storage water heater with a UEF of 0.64 or higher and 55 gallons or less that was not bought from a statewide participating retailer.
Our SoCalGas water heater rebate guide walks through the claim step by step.
Customers of PG&E, SDG&E and other California utilities can compare tankless water heater rebates by utility.
To see every California rebate your address qualifies for, use the DuloCore rebate calculator.
Frequently Asked Questions
Can I Still Claim the Credit for a Tankless Water Heater Installed in 2025?
Yes, if the unit was placed in service by December 31, 2025, came from a qualified manufacturer, and you report its Qualified Manufacturer Identification Number (QMID) on your tax return; the credit ended for property placed in service after that date.
California homeowners follow the rules on the IRS page linked above.
Who Can Get the SoCalGas Tankless Water Heater Rebate?
SoCalGas customers qualify when a new tankless unit replaces a tank-type water heater in a single-family detached home.
The purchase and installation must happen within the calendar year in an existing residential property.
How Long Does the SoCalGas Rebate Take to Pay?
SoCalGas sends the rebate payment within six to eight weeks once every program requirement is met.
The application asks for a photo of your receipt and of the model tag on the new appliance.
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