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Inflation Reduction Act can save consumers thousands on heat pumps

By Ethan Sandweiss

Posted November 25, 2022

Heat pump units like the one pictured here can function as both a heater and air conditioner. (National Institute of Standards and Technology)

With high energy prices and winter arriving, homeowners could rack up big gas bills. A heat pump, an electric climate control unit that can replace a gas furnace, could cut back significantly on those prices. However, for many households the cost of installing one is a major hurdle.

Thanks to the 2022 Inflation Reduction Act, Hoosiers could be eligible for thousands of dollars in discounts on heat pump installation. But not everyone will qualify.

Heat pumps function like an air conditioner in reverse, pulling heat from the air outside a home and pumping it in. Although they take longer to warm a home, they require less energy and produce less emissions than a gas furnace, which is why the federal act incentivizes to have them installed.

The Inflation Reduction Act rebates apply to most people who install a heat pump from 2023 through 2031, with some exceptions.

Consumers making less than 80% of a state’s median income are eligible for a federal tax credit of 30% or up to $2,000 of the total cost. However, only some heat pumps meet high efficiency standards to qualify.

People in this income bracket can also claim up to $1,750 for a heat pump water heater and $8,000 for heat pump space heating and cooling in the form of a state-administered rebate. According to the nonprofit Consumer Reports, consumers who spend $10,000 on those two devices could get up to $9,750 back.

The rebate declines for consumers earning 80% to 150% of the median income, while households earning more are ineligible.

While the Inflation Reduction Act can help buyers save on new pumps, there are other, smaller ways people can stay warm for less this winter. Closing your chimney flue, moving furniture away from vents and radiators, letting in sunlight and lowering the temperature of your water heater can all add up.