In addition to the four main cost factors listed above, there are some other considerations to be aware of that may influence your total tankless water heater installation cost.
If your existing water heater is located in a difficult area to access, you’ll most likely have to pay more for its removal and the installation of the new one. For example, water heaters in an attic or around tight corners will cost more than one sitting in an open basement.
Additional Changes to Your Home
Installing a tankless system may also require additional changes to your home. For example, if you want to install a cabinet to contain the heater, or you need additional insulation for pipes that run outdoors, you may want to hire a carpenter or other handyman. Work times for these projects vary, but professionals usually charge $25–$75 per hour. For large electrical units, you may need an electrician to do some rewiring at a cost of $50–$100 per hour.
Condensing vs. Non-Condensing
Condensing tankless water heaters tend to have a higher up-front cost, but they offer extra energy savings by recapturing and using the exhaust heat in a second heat exchanger. Non-condensing units have only one heat exchanger and are about 17% less efficient.
Tankless models are more affected by mineral buildup than tank water heaters, so if you live in an area with hard water, you’ll want to install a whole-home water softener system if you don’t already have one.
Tankless water heaters can be designed for indoors or outdoors. Outdoor units save space and require fewer alterations to walls, but any outdoor water pipes must be carefully insulated and may be less efficient in cold climates.
Tankless water heater installation uses a gas connector kit, which costs $20–$40, and a termination vent kit, which costs $40–$100. In addition, you’ll be charged for mounting hardware and fittings, as well as a two-piece brass valve set—all of which can reach up to $175. Any piping and required insulation tend to cost around $10 per foot.
Depending on your local building codes, a technician may need a permit to install a tankless water heating system in your home. These permits come with additional fees and vary by location.
Energy Star-rated gas or propane tankless water heaters with an energy factor of 0.95 or better qualify for a 30% tax credit for the project’s cost, or a maximum $600 federal tax credit. You may also be eligible for state tax credits or rebates.
All gas- and propane-powered heaters must vent exhaust. This can happen through a direct vent, which pulls cool air inside and sends heat exhaust back outside through a vertical pipe or chimney. Alternatively, a power vent system draws air from indoors and uses a fan to push exhaust through a horizontal pipe. Power vent water heaters have a little more flexibility as to where in the home they can be installed.
Yearly Cost to Operate a Tankless Water Heater
A tankless water heater’s efficiency and price will depend on a number of factors, such as fuel source, water usage, and local climate. The more hot water you use, the more it will cost to heat. Additionally, if you use multiple appliances at a time—for example, showering while you run the dishwasher—it increases your home’s peak flow rate and demands more of the tankless system.
Homeowners in cold climates may need a tankless unit rated for a higher GPM to compensate for the lower water temperature as it enters the system. The colder the groundwater, the more energy is needed to heat it. For example, groundwater in Southern and Gulf states is usually around 72 degrees and takes 400 BTU to heat to 120 degrees Fahrenheit. However, groundwater across most Mid-Atlantic, Midwestern, and Pacific states is around 52 degrees Fahrenheit, which takes 466 BTU to heat to 120 degrees Fahrenheit.
Overall, the most predictable variation in cost is due to fuel type. Here are some average operating costs for the major types of tankless water heaters. Unfortunately, due to the rarity of oil-fired tankless water heaters, there’s not much information available about operating costs.