If your current water heater is getting up in years, now is a good time to replace it with a heat pump model. A heat pump hot water heater is super-efficient and there’s a federal tax credit available to home owners who install them.

A heat pump hot water heater works by pulling heat from the air surrounding it. This process is much more efficient than heating water with an electric heater that uses only heating elements – up to two to three times more efficient. It is also more efficient than a methane (natural gas) powered water heater. And natural gas extraction and leaks are major drivers of climate change.

Heat pump hot water heaters can cost as little as $10 per month to run and can save hundreds of dollars per year in operating costs. If you currently have a regular electric hot water heater, you could save $350 per year in operating costs with a heat pump model.

Here’s what you’ll need to get a heat pump hot water heater installed:

• A dedicated 240V circuit – make sure you have enough breakers available on your electric panel before you purchase the water heater. A licensed electrician can assess your panel and install the line. While most models require 240V, there are a few models that can plug into a 120V outlet.
• A well-ventilated space. Since heat pump hot water heaters work by drawing heat from the surrounding space they need adequate ventilation – they can’t be installed in a sealed off closet (or they will need piping for air intake and/or outlet).
• A space that is warm enough for the heat pump to pull heat from the surrounding air – generally above 40 degrees Fahrenheit at all times.
• A space with sufficient height. Heat pump hot water heaters are taller than most other water heaters and may have filters on top that need to be removed and cleaned periodically.
• A plumber to install the water heater. Any licensed and insured plumber that is used to installing electric hot water heaters should be able to install a heat pump model.

Make sure you keep all your receipts for the purchase and installation. There are federal tax credits for installing heat pump hot water heaters. You can claim up to 30% of the installation cost, up to $2,000. Since heat pump hot water heaters cost about $3,600 to install, on average, those incentives can really help.