Tankless units have skyrocketed in popularity. They provide endless hot water whenever you need it. However, picking the right model from the countless options on the market is a challenge.
We broke down everything you need to know about tankless water heater costs, the different fuel types, and what to expect during installation.
Key Takeaways
- Instant supply: Tankless water heaters provide on-demand hot water and can last up to 20 years.
- Higher upfront cost: Installation ranges from $1,500 to $2,000, but efficiency saves money over time.
- Fuel types: Choose between gas, electric, and solar-powered heaters based on your home’s setup.
- Professional help: Hiring a pro avoids warranty issues and ensures your gas or electric lines meet code.
How Much Does Installation Cost?
You should expect to pay between $1,500 and $2,000 for a tankless water heater installation (1). This is significantly higher than a traditional tank water heater, which typically costs between $761 and $1,426 (2).
Here is a breakdown of national averages by heater type:
| Water Heater Type | Average Cost (National Average) |
| Traditional Tank | $1,089 |
| Tankless Water Heater – Gas | $1,000-$1,500 |
| Tankless Water Heater – Electric | $800-$1,500 |
| Solar Water Heater | $1,863-$5,365 |
| Heat Pump/Hybrid Water Heater | $2,695-$2,830.50 |
Additional Cost Factors
The sticker price on the unit isn’t the only expense. Labor, permits, and home modifications play a huge role in the final bill.
- Unit Quantity: Large homes with spread-out bathrooms may need more than one tankless unit to prevent lag time.
- Fuel Source: Your choice of fuel impacts long-term savings. Water heaters are a major drain on energy bills, so choose wisely.
- Maintenance: While tankless units require less maintenance than tanks, you still need to budget for annual flushing to remove scale buildup.
- Reconfiguration: If you are switching from a tank to tankless, you may need to move piping or upgrade gas lines, which increases labor costs.
- Disposal: Removing your old system costs money. Some installers include this in the quote, but always ask to be sure.
Types of Tankless Water Heaters
Tankless water heaters are often called on-demand or instantaneous heaters (3). Instead of heating a massive tank 24/7, these units flash-heat water only when you turn on the tap.
Most homes use gas or electric models. Neither is inherently “better,” but your home’s existing utility setup usually dictates the right choice. It is worth consulting a professional to see if your gas line or electrical panel can handle the load.
Gas Tankless Water Heaters
Gas units run on natural gas or propane. Natural gas requires a permanent line hookup, while propane requires regular tank delivery. Gas heaters are powerful, with outputs ranging from 140,000 to 380,000 BTUs.
These units are generally more expensive to buy and install. Expect to pay at least $1,000 for the unit alone.
Venting Requirements
Venting is the trickiest part of gas installation. Non-condensing units need Category III stainless steel venting to handle the exhaust. This material is expensive.
Condensing tankless systems are more efficient and often easier to vent. While non-condensing units run at 80% efficiency, condensing units exceed 90%.
Although gas costs more upfront, it is usually cheaper to operate monthly. If gas is affordable in your area, this is the smart long-term play. Plus, gas units often work during power outages (if they have battery backup ignition), whereas electric units will fail.
Pros
- High capacity: Better for heavy usage and large families.
- Reliability: Can function during power outages with battery backup.
- Savings: Lower monthly fuel costs in many regions.
- Longevity: Designed to last 20 years.
- Performance: Superior performance in colder climates.
Cons
- Price: Costs more upfront than electric models.
- Installation: Venting and gas line upgrades can be pricey.
- Volatility: Gas prices fluctuate more often than electricity.
Electric Tankless Water Heaters
If you want to save cash upfront, go electric. These units average around $500 and are much easier to install since they don’t require venting.
Electric heaters produce zero greenhouse gases and are compact enough to fit in a closet or under a sink.
The Electrical Panel Issue
The biggest hurdle is power. An electric tankless heater pulls a massive amount of electricity, often 120 amps or more. If your home has an older 100-amp or 150-amp panel, you will need a service upgrade. Upgrading your electrical panel can add $1,500 or more to the project.
However, electric units are simple to troubleshoot and maintain. This simplicity helps them easily reach their 20-year lifespan (4).
Pros
- Size: Ultra-compact design fits anywhere.
- Cost: Cheaper purchase price than gas units.
- Setup: No venting required makes installation easier.
- Durability: Fewer parts mean easier maintenance.
- Life Expectancy: Should last 20 years or more.
Cons
- Capacity: You may need multiple units for a large home.
- Upgrades: Often requires an expensive electrical panel upgrade.
- Outages: No hot water when the power goes out.
Solar Water Heaters
Solar is the ultimate efficiency upgrade. Plus, the Residential Renewable Energy Tax Credit allows you to claim 30% of qualified expenditures (5).
While installation is pricey, solar can drop your water heating bills by 50% to 80% (6). Since it is powered by the sun, you don’t have to worry about fluctuating fuel prices.
There are two main types of solar configurations:
1. Passive Systems
These are cheaper and generally more reliable but aren’t great for freezing climates.
- Integral Collector Storage (ICS): Cold water flows into a collector on your roof, heats up, and flows to your plumbing.
- Thermosiphon: Ideally for strong roofs, this system uses natural physics (warm water rises) to move water from a collector into a heavy storage tank mounted on the roof.
2. Active Systems
These use pumps to circulate water and are better for colder regions.
- Direct (Open-Loop): Pumps circulate household water through the collectors. Best for climates that don’t freeze.
- Indirect (Closed-Loop): Pumps circulate a freeze-proof antifreeze solution through the collectors and a heat exchanger. This heats the water without exposing pipes to freezing air.
Choosing the Best Unit for Your Home
Picking the right heater depends on your climate and your family’s habits.
If you live in a cold climate, the groundwater is colder. The heater has to work harder to warm that water up. Gas heaters are generally better for these environments because they can raise temperatures faster than electric models.
You also need to calculate your water usage. If you run the dishwasher, washing machine, and shower at the same time, you need a high GPM (Gallons Per Minute) rating.
Single-Point Systems
Also known as “point-of-use” units, these are small heaters installed right near a faucet or shower (7).
These are perfect for a guest bathroom, an outdoor kitchen, or a home addition where running new pipes is too expensive. However, you cannot run an entire family home on one single-point system.
Whole-Home Units
These powerful units replace your main boiler and supply every tap in the house. They are larger and more expensive but necessary for standard living.
You need to measure your utility space before buying. While smaller than tanks, they still need clearance for venting (if gas) and maintenance.
Here is a look at the top brands and their average costs:
| Brand | Avg. Cost of Popular Models | Price Range |
| A.O. Smith | $600-$700 | $600-$4,000 |
| Takagi | $500-$700 | $500-$7,000 |
| Rheem | $200-$500 | $200-$2,500 |
| Bradford White | $500-$700 | $500-$2,000 |
| EcoSmart | $200-$500 | $150-$600 |
| Rinnai | $800-$1,000 | $500-$4,300 |
DIY or Hire a Professional?
Installing a tankless water heater is not a beginner DIY project. Most cities require a permit and a safety inspection.
Gas lines, venting, and high-voltage electricity are dangerous if mishandled. Hiring a pro ensures your family is safe and your home stays up to code.
Keep In Mind
FAQs
What Is the Downside of a Tankless Water Heater?
The main downsides are the high initial cost and the potential “cold water sandwich” effect. Because they don’t store hot water, if you turn the tap off and back on quickly, you might get a momentary burst of cold water. Also, if your groundwater is very cold, the unit might struggle to keep up with high demand, like running a shower and dishwasher simultaneously.
Why Is Tankless Water Heater Installation So Expensive?
Installation is pricey because it often involves retrofitting your home. You aren’t just swapping a tank; you might need new gas lines, new stainless steel venting, or a heavy-duty electrical panel upgrade. If you are replacing an old tankless unit with a new one, the cost is significantly lower.
Can a Tankless Water Heater Fill a Bathtub?
Yes, a tankless heater can fill a bathtub, and it won’t run out of hot water halfway through. However, the fill time depends on the flow rate (GPM). If you have a large soaking tub and a low-GPM heater, it might take a long time to fill.
Is a Tankless Water Heater Worth the Cost?
Yes, especially for households that use 41 gallons of water or less per day. For these homes, tankless units can be 24% to 34% more energy-efficient than storage tank water heaters, leading to significant savings over the unit’s lifespan.
How Long Do Tankless Water Heaters Last?
Tankless water heaters are incredibly durable and typically last 20 years or more. This is nearly double the lifespan of a traditional tank heater, which usually lasts 10 to 12 years. Regular maintenance, such as descaling, is key to hitting that 20-year mark.
What Size Tankless Water Heater Do I Need for a Family of 4?
For a family of four, you typically need a unit that provides roughly 7 to 10 gallons per minute (GPM). This allows for running two showers simultaneously, or a shower and a dishwasher, without a drop in temperature.
Do You Need a Tankless Water Heater for Each Bathroom?
No, most homes use a “whole-home” unit that supplies every bathroom and appliance. However, if you have a bathroom located very far from the main unit, you might add a small “point-of-use” electric heater there to ensure instant hot water.
Can You Run Out of Hot Water With a Tankless Water Heater?
Technically, no. Since it heats water instantly, you will never “empty the tank.” However, you can overwhelm the system. If you try to draw more water than the heater can process at once (like running three showers), the water temperature will drop or flow will decrease.
What Maintenance is Needed on a Tankless Water Heater?
The most critical maintenance task is flushing the system to remove mineral buildup (scale). This should be done once a year, or more often if you have hard water. Neglecting this can lead to system failure. Installing a water softener can drastically reduce maintenance needs.
Does a Tankless Water Heater Increase Home Value?
Yes, installing a tankless water heater can increase your home’s appeal to buyers. It is seen as a modern, energy-efficient upgrade. While it might not add a massive dollar amount to the appraisal, it is a strong selling point that signals the home is updated and well-maintained.
Final Thoughts
We all want to lower our carbon footprint and save on monthly bills. Tankless water heaters achieve both, offering far better efficiency than old-school tanks.
However, the buy-in isn’t cheap. Between the unit cost ($500 to $1,500) and installation ($1,500 to $2,000), it is a significant investment. Evaluate your water usage and budget carefully. If you decide to make the switch, hire a professional to ensure your warranty stays valid and your showers stay hot.
