If you’re looking to cut down on your hot water bill, you might want to look into installing a tankless water heater. These only heat water as needed, which means greater efficiency and lower energy costs. They can be small enough for use with a single faucet or large enough to provide hot water for an entire home.

Of course, tankless units have some drawbacks, too—namely, that they can be expensive. Tankless water heater installation cost can range from $1,200 to $3,500, depending on the model. Our cost guide to tankless water heater installation covers both the prices of the unit themselves and the costs to install and run them. We’ll also list common pros and cons, give money-saving tips, and answer frequently asked questions to help you decide whether or not a tankless water heater system is right for your home.

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Typical Price Range: $1,200 - $3,500
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Tankless Water Heaters

Tankless water heaters typically cost between $1,200–$3,500.

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Tank Water Heaters

Storage tank water heaters cost on average between $820–$1,290.

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Gas Water Heaters

Gas heaters on average, cost between $700 - $3,000.

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Tankless Water Heater Installation Cost

The national average for tankless water heater installation cost is around $2,800. Depending on the model, the units themselves usually cost between $500 and $2,000, with installation adding another $500 to $1,500. However, for large or specialty units, you may pay as much as $6,600 in total costs.

National Average$2,800
Minimum Cost$1,200
Maximum Cost$3,500

Fuel Sources for Tankless Water Heaters

The first choice you’ll have to make when considering tankless water heaters is the fuel type. Possible fuel choices include the following:

  • Electric tankless water heaters: These are the most popular choice because they’re easy to install and maintain. They’re readily available in small sizes, though you can rarely find electric models large enough to heat water for a home of four bedrooms or more.
  • Natural gas tankless water heaters: Gas options are also popular, though they cost a little more than electric models and require more labor to install. However, they can handle many more gallons of water per minute, making them ideal for large homes and cold weather climates.
  • Propane fuel: Propane can be used as a fuel source for most tankless water heaters wired to run on natural gas, though they may require a converter. You can also find units made specifically for propane, which is often the fuel of choice for homeowners in more remote locations.
  • Solar-powered tankless water heaters: These eco-friendly models are the most expensive to install and maintain, but they have the lowest operating costs because they draw power from the sun. As you might expect, these are most useful in sunny climates.

Keep in mind the following water heater prices apply to the tankless unit only and don’t include installation.

Tankless Water Heater Cost by Fuel Type

Natural gas$750–$2,000

Common Sizes for Tankless Water Heaters

Next, you’ll need to decide what size tankless water heater you need. You can choose either a point-of-use unit, which heats water for a single appliance, or a whole-home unit. Single-point units are much smaller and thus less expensive. They’re also more efficient since the hot water doesn’t need to travel as far. However, you’ll need to buy one for each source of water that needs to be heated.

The flow rate of all tankless water heaters can be measured in gallons per minute (GPM) of hot water. Faucets and dishwashers can usually be comfortably heated with a one to two GPM unit, though showerheads and washing machines typically need two to four GPM. When it comes to whole-home units, a small, one-bedroom house may only need a two to three GPM model, but larger homes will need units of up to 10 GPM.

Tankless Water Heater Costs by Size

1–2 GPM$150–$250
2–3 GPM$200–$600
3–4 GPM$300–$700
5–6 GPM$400–$1,200
7–8 GPM$500–$1,500
8+ GPM$600–$2,000

Tankless Water Heater Cost by Brand

AO Smith$600–$1,550
Bradford White$500–$1,700

Professional Tankless Water Heater Installation

While you may be able to set up a point-of-use electric heater by yourself, whole-home and gas-powered units will need to be installed by a licensed plumber. Plumbers are trained to work not just on water pipes but on gas lines as well, and they’ll be able to hook everything up safely. 

Additionally, a plumber will ensure that the installation is up to code for factors like carbon dioxide emissions and thermal regulation. Plumbers typically charge $75 to $150 an hour, and installation can take anywhere from two to 10 hours, depending on the complexity of the job and the type of water heater.

Tankless Water Heater Installation Labor Cost

TypeLabor Costs
Natural gas$900–$1,500

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 to $75 an hour. For large electrical units, you may need an electrician to do some rewiring at a cost of $50 to $100 per hour.

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Tankless Water Heater Conversion Costs

If you have a traditional tank heater and want to switch to a more energy-efficient tankless model, you should hire a plumber to convert your system. Conversion costs about the same as installing a brand new tankless water heater, since you’ll need to have the old system removed and all plumbing brought up to code. Again, this is usually between $1,200 and $3,500 in total.

Costs to Convert Tankless Water Heaters

New heater$500–$2,000
Removal/disposal of old tank$100–$500
New electrical outlet$150–$300
Upgrade gas lines$350–$750
Update plumbing$100–$500
Attic/closet installation$75–$150

Tankless Water Heater Installation Steps

Although installing a whole-home tankless water heater system isn’t a DIY job, it’s still a good idea to know what goes into it so you know what to expect from the professional you hire.

  1. Your installer will turn off the incoming water to the home.
  2. If replacing an old water heater, they will disconnect the unit from the water and power lines, remove it from the home, and dispose of it according to local regulations.
  3. Next, the plumber will determine the best place in the home for the new tankless system and mount it on the wall.
  4. For gas heaters, it’s important to install ventilation ducts, which often require a large, stainless steel flue to handle the high heat. Electric units don’t require venting.
  5. The water lien will be connected to the new system.
  6. If installing an electric tankless water heater, the professional will plug the heater in. 
  7. For gas units, your installer will hook up the gas supply line. This will likely require an increase in diameter from a standard half-inch diameter pipe to a three-fourths-inch diameter. Once connected, they will ignite the pilot light. 
  8. Finally, your will test the hot water on a nearby faucet. The water may take a moment to warm up, as it would with a traditional tank system.


Cost Factors to Consider

In addition to the fuel source, size, and brand of your tankless hot water heater, here are some other factors that can affect the final cost of installation.

  • Location: Tankless water heaters may be designed to be installed indoors or outdoors. Outdoor units save space and require fewer alterations to walls, but any outdoor water pipes must be carefully insulated, and these units may be less efficient in cold climates.
  • 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.
  • Venting: 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.
  • Tax credits: Energy Star-rated gas or propane tankless water heaters with an energy factor of 0.82 or better qualify for a $300 federal tax credit. You may be eligible for state tax credits or rebates as well.
  • Hard water: 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.
  • Permits: You may need a permit to install a tankless system, particularly if it’s installed outdoors. Plumbers usually factor this into their estimates.

Yearly Cost to Operate a Tankless Water Heater

The efficiency and price of running a tankless water heater will depend on a number of different factors including fuel source, water usage, local climate, and more. The more hot water you use, the more it will cost to heat it. Additionally, if you use multiple appliances at a time—for example, showering while you run the dishwasher—this will increase your home’s peak flow rate and demand more of the tankless system.

Homeowners in cold climates may need to choose a tankless unit rated for a higher GPM to compensate for the lower temperature of the water as it enters the system. The colder the groundwater, the more energy is needed to heat it. For example, groundwater in the 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 costs for operating 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.

FuelMonthly Operating CostAnnual Operating Cost
Natural gas$16–$22$192–$264


Pros and Cons of Tankless Water Heaters

Most homeowners are more familiar with traditional tank water heaters and may wonder whether the extra up-front cost to install a tankless model is worth it. Here are some of the key benefits and drawbacks of converting to a tankless water heater system.

✔ Tankless heaters are anywhere from 8% to 34% more energy-efficient, according to the U.S. Department of Energy.

✔ This heater type is safer than traditional tanks, which can leak, rust, or harbor bacteria.

✔ A tankless system usually has a longer lifespan than a traditional system: 15–20 years, as opposed to 8–12 years.

✘ Tankless systems cost more and are more expensive to install and maintain than traditional units.

✘ If there’s buildup in pipes or small clogs, the automatic shutoff may cut off hot water.


How To Save Money on Tankless Water Heaters

Once you’ve purchased your new tankless water heater, there are several ways to maximize your savings. You shouldn’t try to cut costs by attempting to install a gas-powered tankless system yourself or hiring a cheap contractor who isn’t a licensed plumber. 

Instead, focus on the following tips to help you get the most out of your new system:

  • Anything you can do to reduce hot water usage will directly reduce the cost of operating a tankless water heater. This includes using low-flow and water-saving fixtures and washing clothes in cold water whenever possible.
  • Whole-home units are more efficient when fewer sources need them at the same time, so wait until you’re done showering to do laundry.
  • Take advantage of rebates on condensing tankless water heaters, which will offer more energy usage savings over time.
  • Have a plumber or heating contractor perform annual maintenance on your tankless system. This will keep it working at peak efficiency and make it last its full lifespan.
  • A home warranty that covers vital home systems will almost always cover water heaters. Many cover tankless water heaters as well, meaning that the contract will cover the cost of repairs to units that break down due to wear-and-tear damage.

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Is a Tankless Water Heater Worth It?

To determine if a tankless water heater is worth it, we’ve compared the two most common types, natural gas and electric, with traditional tank water heaters over the first decade of ownership. Keep in mind that a tank water heater may need to be replaced after 10 years.

Tankless Water Heater Costs Over Time

Tank TypeUnit CostInstallationAnnual Operating CostTotal First Year CostsCost over Ten Years
Electric tank$200–$900$700–$1,000$440–$580$1,340–$2,480$5,300–$7,700
Electric tankless$500–$1,500$150–$1,000$300–$540$950–$3,040$3,650–$7,900
Gas tank$250–$1,500$500–$750$225–$350$975–$2,600$3,000–$5,750
Gas tankless$750–$2,000$900–$1,500$192–$264$1,842–$3,764$3,570–$6,140

Tankless water heater installation costs are usually worth it if:

  • Your home is already powered by natural gas.
  • You live in a climate with warm groundwater and/or lighter water heating needs.
  • You can afford the up-front costs of materials and labor.
  • Living an eco-friendly and energy-efficient lifestyle is a priority to you.
  • Your home doesn’t have room for a large water storage tank.

A tankless water heating system might not be right for your home if:

  • Your current home improvement budget is limited.
  • Your home is powered by electricity and you have large water usage needs. (However, you can still use point-of-use units.)
  • You live in a cold climate and have heavy water usage needs.

Tankless Water Heater Installation: DIY vs. Professional

It bears repeating: Don’t try to install a gas-powered or whole-home tankless water heater yourself. Although these systems are very safe when professionally installed, they usually have complex requirements to vent heat and carbon monoxide, and getting this wrong could void your warranty or put you or your family’s safety at risk. However, point-of-use electrical units can usually be installed simply by plugging them in and hooking up the water lines. 

Choosing a Tankless Water Heater Installer

Since installation is so important to water heater operation and safety, make sure you choose a qualified contractor. Here are some tips for finding an installer that you can trust:

  • For gas-powered tankless water heaters, you need to hire a licensed plumber. Also make sure the plumbing company is bonded and insured.
  • Call at least three contractors for estimates, and ask whether they have experience installing these units.
  • Look up potential contractors on the Better Business Bureau (BBB) website and read customer reviews.
  • Get all necessary documents in order before the work begins: a written estimate, contract, and any applicable warranties.


Our Conclusion

Although tankless water heaters cost more to buy and install, they’ll save you energy and money in the long run. It’s important to get a professional you trust to install your unit. However, that doesn’t mean they’re right for every home. Review your options and plan out the long-term costs before making a decision. To connect with a local plumber, fill out this simple form or enter your ZIP code below.

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Frequently Asked Questions About Tankless Water Heater Installation Cost

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