Tankless Water Heater Cost Breakdown: Everything you need to know. 

Ready to Yank the Tank?

A good water heater is like a great pair of pants. You don’t realize how important they are every day until they suddenly stop working. Then you’re left cold, distressed, and with everybody looking at you funny.

Most houses have been built with tank-style water heaters, which heat up a limited amount of water in batches and may run out on you if you take a shower for too long. Or, perhaps, if your teen jumps in the shower before you and only leaves you arctic leftovers to shiver through. That’s exactly what leads families to consider upgrading to a tankless water heater, which delivers all the hot water you need on demand without a bulky tank. If you’re ready to escape the days of cold showers, you may be curious what it costs to convert to a tankless water heater.

Well, look no further, because we’re here to tell you everything you need to know!

How much does a tankless water heater cost?

Here’s the quick breakdown before we get into the details:

• Tankless water heater + installation: $6,000–$8,000 or more, depending on modifications
• Conversion/retrofit labor and materials: $3,000–$6,000 (more on this below)
• Money saved through increased efficiency: up to $125/year

It is also worth noting that, due to their high efficiency, many states, counties, and cities offer rebates to offset some of the cost of upgrading to a tankless system. Before upgrading, be sure to check for local rebates.

How Do I Know What Tankless Water Heater is Right for Me?

A tankless water heater is probably right for you if:

1. You often run out of hot water.
2. You don’t have room for a new tank, or you want to save space.
3. You want a more efficient appliance to save on gas.

If any of those sound like you, a tankless unit is worth considering. That still leaves the question of why prices vary so widely and which unit fits your house. A few factors decide that:

• Electric or gas?
• How many appliances and bathrooms does your home have?
• What size unit do you need?
• Is your gas line big enough?
• Is your venting set up to retrofit for a tankless water heater?

That’s a lot of questions, and it’s likely because your house wasn’t built for a tankless water heater. These units operate differently and require a thorough evaluation to ensure everything’s installed correctly, which is why we recommend having a plumber handle it.

Should I choose an Electric Tankless Water Heater or Gas Tankless Water Heater?

When considering which type of tankless hot water heater to install, the first and biggest question is whether you want to use electricity or gas to heat your water. There are a lot of options out there for both, but there are a few pros and cons to consider:

• Power outages: Unlike old-school tank water heaters, tankless water heaters, by their nature, use electricity to function. The unit itself has electronic components and needs to be connected to an electrical outlet. The downside is that, unlike tank water heaters, this water heater requires electricity to run. If the power goes out, the water heater doesn’t work. So, regardless of which option you choose, your hot water heater will not work during a power outage.
• Highest temperature: Perhaps most important to some hot bath lovers, a gas water heater can get hot water hotter than an electric water heater. Electric heaters heat by heating metal rods with electrical resistance, whereas a gas water heater still essentially uses a flame. Ultimately, this means that hot water gets hotter with gas.
• Cost: Electric water heater systems are significantly cheaper on average, costing between $500 and $1,500. The installation, on the other hand, can be quite costly. Electric tankless water heaters require a ton of electricity, so, on top of that, most people need a panel upgrade, and the wiring is quite costly as well. So, in reality, unless you already have the electrical capacity, it’s not really cheaper. Gas tankless water heaters cost between $1,000 and $3,200 on average. They might require some upgrades to the gas line or venting, but they generally require less than an electric. All in all, both options will be similar in cost.  
• Water Quality: This matters more than you think. Electric tankless units use heating elements to flash-heat the water passing through, and if you have hard water, they can easily get covered with mineral buildup. That buildup can cause the unit to require repairs or replacement much sooner than a gas unit would. Gas can have the same issue, but it heats with gas and a heat exchanger, and the chance of buildup with that setup is far less. Fun fact- here in New Mexico, we don’t even install electric tankless water heaters because of the hard water. 

Should I Choose a Whole Home Tankless Hot Water Heater or a Single-Point Tankless Hot Water Heater?

Take a deep breath; this question is easy.

A single-point tankless water heater is connected directly to one room or device. It is less expensive, but is neither designed nor useful for a whole home. If you are installing a tankless water heater for single-point use in a business or non-residential property, it can be a cheaper solution. However, if you are attempting to heat water for even one bathroom and the kitchen, a whole-home tankless water heater is the only sensible option.

What Size Tankless Water Heater Should I Buy?

Now this one can be a little more complicated.

When determining what size tankless water heater to install in your home, you need to think about the water usage in your home to ensure that the unit you choose can support your hot water needs.  Tankless water heater prices vary based on the flow rate needed to produce enough hot water to fulfill your demand; the higher the flow rate, the more BTUs you’ll need.

It is difficult for us to give you a ballpark cost estimate in this guide due to the variables we’ve outlined.  The graph below should give you an idea of how your hot water needs determine the size of unit you need to meet your demand.  Please note that in some cases, if you have a large family or a large hot water demand, it may be necessary to install two units to provide you with enough hot water to meet your demand.

If you have more questions about which water heater you should choose, we recommend consulting the Tankless Water Heater Buyer’s Guide.

Is it hard to install a tankless water heater? 

Yes, Tankless water heaters are typically harder to install than tank water heaters; that’s why they usually cost more.   The price and difficulty difference is due to the process of converting from a tank to a tankless unit.  Most homes were designed for a tank water heater installation. Here are a few things to consider when switching to a tankless water heater. 

• Location of Installation
• Relocation of Water Heater
• Size of Water Heater
• Gas Line Upgrade / Relocation
• Condensation Drain Requirements
• Venting
• Code Upgrades

That’s a lot of stuff, and if it all needs to be changed, it takes time, materials, and a lot of knowledge to make sure everything is done right. That is why getting a good plumber to come and do that work is so important. That way you don’t have any problems. Let’s dive into why you might need some of these common upgrades below. 

Why you need a gas line upgrade for a tankless water heater.

Tankless units flash-heat water rather than heating a large volume of water and keeping it hot. So when your tankless gets called to heat, it uses a ton of gas all at once. It’s like putting a pot of water on the stove to boil right away instead of waiting for it to come to a boil. 

This means the gas line might need to be sized up to deliver enough gas. If this is necessary, it will bring an additional cost with it, though this is hard to estimate as it will vary widely home to home.

What are Condensation Drain Requirements?

Condensation Drain lines are required in 99.9% of tankless water heater installations. This is probably an unwelcome surprise, but it is absolutely necessary. First, you might be asking why my water heater is making a ton of condensation. Well, because they are so efficient, it causes water vapor in the gas to change state and turn into water. This condensate, if left without a place to go, is very corrosive and can cause a ton of problems. 

Standard water heaters don’t need a condensation drain line because they only burn at about 80% efficiency. So for your tankless, which is 97%-99% efficient, a drain line or pump needs to be run from the unit to a drain line in your home.  

Why Do I Need New Venting?

The venting for a tankless water heater is slightly different from that of a tank water heater.

Tank and tankless water heaters vent very differently, and it comes down to two things: exhaust temperature and how the exhaust actually moves.

Tank water heaters rely on natural draft. The exhaust is hot — hot enough that it naturally rises and escapes through the vent, just like smoke rises from a fire. Because that exhaust is so hot, the vent has to be metal. PVC would melt.

Tankless water heaters work differently. They’re so efficient at extracting heat from the exhaust that what’s left over is much cooler cool enough that PVC can handle it without melting. That’s why you’ll usually see tankless units vented with PVC instead of metal.

But there’s a catch: since the exhaust isn’t hot enough to just rise on its own, tankless units can’t rely on natural draft. They need a fan to actively push (or pull) the exhaust out through the vent. And because you’re now dealing with mechanically forced air rather than naturally rising air, the vent has to be sealed tight to prevent leaks, and you risk exhaust escaping into the wrong places instead of safely outside.

What Should I Know about Code Upgrades?

The easiest place to spend a little money now to save a lot later is to have a professional evaluate your installation to make sure it matches building codes in your area. Violations are usually dangerous to begin with, but if an accident occurs and your installation is found to be out of code, it could cost you thousands of dollars.

Every installation is different, and depending on your home, there may be upgrades needed to bring your water heating system up to current code standards.  These items may include pressure or relief valves and expansion devices. These can vary from home to home, so the costs are difficult to outline.  You should talk to your professional about all your options and gain a good understanding of the installation requirements for your specific home.

How Long Will It Take To Install a Tankless Water Heater?

A Tankless water heater will take anywhere from 6-10 hours to install, depending on the specific requirements and configuration of your home. This number can be affected drastically by the rest of the items below.

Will the Location of the Installation for my Tankless Hot Water Heater Affect the Price?

Yes, it may. If the installation you choose for installation of your new water heater or the location of the current water heater you are replacing are difficult to access, installation could become more expensive. 

Most installation costs are determined by the time necessary for installation, the difficulty of the installation, and any specialized equipment or processes necessary. If a water heater is located or installed in a hard to reach or constrained part of your home, the installation will likely become more difficult, take more time, and may require additional specialized tools and materials for the technician. As a result, the total cost of the installation will be higher.

Should I Relocate my Water Heater?

Since tankless water heaters are smaller, some homeowners consider relocating them in their homes. However, this will add costs for installation and may require plumbing and gas line modifications.  Talk to your professional about options for getting an estimate if you’re considering this.

What are the Average Costs for Maintenance for a Tankless Water Heater?

The one area where the traditional water heater tends to be less expensive than a tankless water heater is maintenance. 

Here are the costs to expect:

• Annual Flushing (recommended especially for hard water) 
• Filter Replacement
• Service calls for repairs

How Do I Schedule an Appointment for Tankless Hot Water Heater Installation?

We’d be happy to help you with that! Just give TLC a call today, and we can provide a free evaluation to help you determine the best tankless hot water heater for you and estimate installation costs!