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How Much Does a Tankless Water Heater Cost?

Written by Dan Simms , Edited by Catherine Lane

How Much Does a Tankless Water Heater Cost?

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The modern conservative appeal of the tankless water heater. Image: Olga - stock.adobe.com
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A tankless water heater costs an average of $2,400 for materials and installation labor, but prices can vary based on the type of water heater you choose, the capacity you need, and more. 

While tankless water heaters cost more than standard ones, they’re more efficient and can save you money over time on your energy bills. In this guide, we’ll discuss the average cost to install a tankless water heater and the factors that can affect your total to help you get an accurate estimate.

Key takeaways

  • Tankless water heaters cost an average of $2,400 to install, and prices range from $1,600 to $3,800 in most cases.

  • Tankless water heaters are up to 34% more efficient than standard models and will save up to $125 per year on utility costs.

  • Rebates and incentives can effectively reduce your tankless water heater costs significantly, often by at least $600.


How much is a tankless water heater?

A tankless water heater costs an average of $2,400 to install. You could pay as little as $400 for a small, point-of-use tankless water heater that serves just a single fixture — like a shower or faucet — but most homeowners pay between $1,600 and $3,800 for a whole-home tankless water heater. A top-of-the-line, high-efficiency tankless water heater could cost as much as $5,000 to install.


Factors that impact the cost of a tankless water heater

Tankless water heater costs vary widely because there are a few factors that can influence your total. Consider all of the following to ensure you get an accurate estimate for your installation.

Type of tankless water heater

There are two main types of tankless water heaters: whole-home water heaters and point-of-use or single-point water heaters. As the name suggests, whole-house water heaters serve the entire home, like a standard storage-tank water heater. A point-of-use water heater provides hot water for a single fixture.

Whole-home hot water heaters are more expensive because they have much higher capacities, up to around 12 gallons per minute (GPM). A whole-home tankless water heater costs an average of $2,400, but costs can range anywhere from $1,600 to $3,800. 

Whole-home water heaters tend to use natural gas or propane as the fuel type, as gas has a higher potential heat output. As such, the average natural gas tankless water heater cost sits around $2,400.

Single-point tankless hot water heaters cost an average of $500 and can range from $400 to $750. Single-point water heaters have improved efficiency because the water travels through less piping and has a lower chance of cooling on the way to the fixture. 

However, if you want to go tankless for all of your hot water needs, you’re better off just going for the whole-home tanks. Installing single-point tankless water heaters to all your fixtures will have a higher total cost than going with a whole-home tankless system. Electric models are more common for single-point use, so electric tankless water heaters cost a bit less, on average.

Size

Tankless water heater size also plays an important role in pricing, with larger capacities costing more across the board. You’ll find water heater size expressed in GPM, and the size you need depends on the number and type of fixtures your water heater needs to serve. 

You should consult a professional plumber to determine what size tankless water heater you need, as the calculation involves figuring out your peak water usage demand and the water temperature rise you need, given your local climate. Generally speaking, you should aim for between 8 and 10 GPM for a whole-home water heater for a family of four, which is the average tankless water heater size, or between 2 and 4 GPM for a single fixture.

GPM

Average installation cost

2

$400

3

$800

4

$1,000

5

$1,200

6

$1,400

7

$1,600

8

$2,000

9

$2,400

10

$2,800

Installation

On average, you’ll spend around $1,200 on the installation labor for your new tankless water heater, which accounts for 50% of the average cost. Installation costs can be lower than that if you’re installing a tankless water heater that has the same size and dimensions as your old one and requires no changes to your plumbing.

If you’re replacing a standard water heater with a tankless one, installation costs may be higher because your plumber will need to relocate the plumbing to fit the new tankless system. 

You may also pay slightly higher fees to remove and haul away large tank water heaters than you would to remove a smaller tankless water heater. Prices will always be higher if you’re replacing an electric unit with a gas-powered unit, as you’ll need to pay to run a gas line to the new water heater. Converting from gas as a fuel source to electricity will come with a small added cost to cap the old gas line and may require additional work from an electrician, depending on your home. 


Are there rebates or incentives for tankless water heaters?

Tankless water heaters are more efficient than storage water heaters, so you will have access to efficiency incentives or rebates to help reduce the upfront installation cost.

One such incentive is offered by the federal government and is available to all U.S. residents, pending some eligibility requirements. Under the Energy Efficiency Home Improvement Credit, you can get a tax credit in the amount of 30% of your total installation cost, up to $600 total. For most homeowners paying the average cost of $2,400, the maximum credit of $600 will be available. Individual state governments may offer incentives, as well.

Many utility companies also offer rebates and incentives for tankless water heaters. For example, PSEG, one of the largest utility companies in New York, offers a rebate of between $100 and $300 for electric unit installation. Similarly, SoCalGas, a major utility company in California, offers a rebate of between $800 and $1,200 per tankless water heater you install. You can check the Database of State Incentives for Renewables and Efficiency (DSIRE).


Pros and cons of tankless water heaters

Tankless water heaters are more efficient than standard water heaters, but going tankless is not always an obvious choice. There are some important tankless water heater pros and cons to consider before deciding.

Pros
  • Improved efficiency

  • Endless hot water

  • Incentives available

  • Long-term savings

  • Smaller footprint

  • Longer lifespan

Cons
  • More expensive

  • More maintenance

  • Delay in hot water

  • Inconsistent temperatures

  • Impacted by power outages

  • May need multiple units

Advantages of tankless water heaters

  • Improved efficiency: One of the most significant upsides to going tankless is the improved energy efficiency. According to the U.S. Department of Energy, tankless water heaters can be up to 34% more efficient than standard storage tank water heaters, as you won’t waste energy heating water in a storage tank and old heat the water that you use. 

  • Endless hot water: A major reason homeowners choose tankless is that hot water is entirely on-demand, meaning you’ll never run out mid-shower, as long as the system is properly sized. Standard water heaters have an average tank size of between 40 and 60 gallons, and as you use hot water, cold water flows in and cools the tank, limiting how long you’ll get your desired temperature. 

  • Incentives available: Tankless water heaters are more efficient than standard ones, so incentives are available to help reduce the effective upfront cost. Standard water heaters are eligible for rebates and incentives less often, unless you invest in a heat pump water heater.

  • Long-term savings: Since tankless water heaters heat the water you use, they use less energy. As a result, you’ll see savings on your utility bills. Actual savings will depend on many factors, but the average is around $125 per year or close to $2,500 over the life of your water heater.

  • Smaller footprint: Tankless water heaters are significantly smaller than standard ones because they don’t need a 40- to 60-gallon tank to hold hot water. They’re typically mounted on a wall and take up much less space.

  • Longer lifespan: Tankless water heaters last for around 20 years or more with proper maintenance, while standard water heaters have an average lifespan of around 10 years. Tankless heaters are a bit less than twice as expensive, but you get double the useful life out of them, making them a better value overall, even without considering long-term energy savings.

Disadvantages of tankless water heaters

  • More expensive: While you’ll save money over time with a tankless water heater, they do come with a significantly higher installation cost. Installing a tankless water heater costs an average of $2,400, whereas a standard water heater costs around $1,400.

  • More maintenance: Tankless units rely on water filters to prevent hard water mineral buildup inside the system. You’ll need to clean out the filter once every two to three months or more often if you have hard water in your area. 

  • Delay in hot water: Tankless water heaters provide “on-demand” hot water, but there is usually a small delay before your water heats up to the desired temperature. This is because they don’t hold hot water in reserve, so you could see a slightly longer delay in getting up to temperature.

  • Inconsistent temperatures: Tankless water heaters suffer from what’s called the “cold water sandwich” effect. This occurs because hot water remaining in your pipes comes out first, then you have a few seconds to a minute of cold water while your tankless heater turns on and heats up, and then you get true on-demand hot water. Standard water heaters have a reserve of hot water to avoid this issue.

  • No hot water during power outages: Since tankless water heaters don’t store heated water, you’ll have no access to hot water at all if the power goes out. Standard water heaters also won’t work during a power outage, but you’ll have a full tank of hot water in reserve for emergencies. 

  • May need multiple units: With a tankless water heater, you carefully consider the GPM rating and size it appropriately for your home. For larger homes or homes with many family members, you may need to install multiple tankless water heaters, which can quickly get expensive.


Should you get a tankless water heater?

Tankless water heaters have many benefits that make them enticing, but you’ll need to think carefully about whether or not it’s the right option for you.

If you want to prioritize a low upfront cost, especially if you’re replacing your old water heater in an emergency situation, you’re better off with a standard water heater. These will run you roughly half of the cost of installing a tankless water heater. If you have a very large family or a large home with multiple bathrooms and hot water appliances that you’ll use concurrently, a larger storage tank water heater may serve you better.

On the other hand, you should consider a tankless water heater if efficiency and long-term savings are more important to you. Just from a value perspective alone, a tankless water heater is a little less than double the cost but lasts for about twice as long, so you get more value for your money with a tankless water heater.

That’s not even considering the cost savings you’ll see from a tankless water heater. With average energy costs per year sitting around $1,945 and an estimated 19% of those costs going to water heating, the 34% bump in efficiency you’d get from a tankless water heater would equate to average annual savings of $125. Over the 20-year appliance lifespan, that comes out to around $2,500 in savings, which more than makes up for the added cost.

Finally, a tankless water heater will reduce your carbon footprint, so it’s the better option for environmentally conscious homeowners.

Find out how much you can save on your utility bills by powering a tankless water heater with solar panels
Written byDan SimmsSolar Writer

Dan has been a solar proponent for more than a decade now, and he has been researching and writing about solar and renewable energy for the past five years. He has first-hand experience with solar conversion, and he uses that and his research to help homeowners lower their electric bills and reduce their carbon footprint through solar education and adoption. He has written for major publications, including CNN, USA Today, and EcoWatch, and he has...

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