Arizona’s extreme summer heat reshapes the gas vs. electric water heater cost comparison in ways that surprise most homeowners. Incoming groundwater warms significantly by summer, and hot garages act as free pre-heating environments – both factors that benefit electric heat pump water heaters more than any other type. In 2025, heat pump units from brands like Rheem, AO Smith, and Bradford White qualify for up to $600 in federal tax credits plus APS and SRP rebates, making them the lowest lifetime-cost option for most Arizona homes. Gas water heaters remain competitive for large households with existing gas lines and high daily demand. Standard electric resistance units carry the highest running costs over time. Permits are required for installations in most Arizona cities, and verifying ROC contractor licensing is a must before any work begins.