A tankless water heater installation can cost $1,200–$3,500, averaging $2,800 with equipment and labor, based on research by the This Old House team. Unlike conventional systems, these units heat water instantly without a storage tank, offering benefits for energy-conscious homeowners. Before selecting your unit, check out our guide to the best tankless water heaters for model comparisons.
Switching to tankless or on-demand water heating can improve energy efficiency by up to 34% compared to standard tank models, according to the U.S. Department of Energy. On-demand heating saves space in your home and provides continuous hot water for 15–20 years with regular system maintenance. Read on to learn more about tankless water heater costs, equipment types, and how to save on installation.
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Tankless Water Heater Installation Cost by Fuel Type
Your choice of electricity, natural gas, or propane as the fuel source for your tankless water heater affects the purchase price and operating costs. Electric units need specific voltage and amperage to operate, while gas- and propane-powered models require venting and gas line specifications. Here’s a cost breakdown by fuel type:
| Tankless Water Heater Type | Unit Cost Range | Installation Cost Range | Total Cost Range |
|---|---|---|---|
| Electric | $500–$1,500 | $150–$1,000 | $650–$2,500 |
| Propane | $500–$2,000 | $900–$1,500 | $1,400–$3,500 |
| Natural gas | $750–$2,000 | $900–$1,500 | $1,650–$3,500 |
Note: We determined the above cost ranges using RSMeans data from Gordian and market research.
In addition to the unit cost, licensed plumbers charge $75–$150 per hour for installation, which typically takes 4–8 hours. Your home’s current setup also affects installation complexity, and in turn the total cost. Electric models cost less upfront but might need panel upgrades, which can add to the price of your project. Gas units have higher initial costs but offer stronger flow rates, or the amount of hot water a water heater delivers, and lower operating expenses.
In the sections below, we’ll look at specific installation requirements for tankless water heaters based on each fuel type.
Propane Tankless Water Heater Installation
Propane tankless heaters work best in homes without natural gas access. These units deliver 8–10 gallons of water per minute (GPM), supporting multiple hot water fixtures at once. Units cost $500–$2,000, with costs varying by size and manufacturer, such as Rinnai or Rheem.
A propane tankless water heater setup needs direct or power venting, precise gas line sizing, and often a conversion kit for fuel switching. Licensed plumbers need to verify gas pressure and install carbon monoxide detectors. While costing more upfront than electric models, propane units heat faster and maintain steady temperatures in cold weather. Homeowners opting for this fuel type can plan for a minimum 100-gallon propane tank and ongoing fuel delivery service as needed.
Electric Tankless Water Heater Installation
Electric models offer the lowest equipment costs at $500–$1,500 per unit. These compact heaters can suit homeowners in warmer regions and with smaller households, delivering 3–8 GPM based on the model. Point-of-use versions can fit under sinks or in closets, serving individual fixtures efficiently.
Installation success depends on your home’s electrical capacity. Most tankless water heater units require 120–160 amps of dedicated service and multiple 240 volt (V) circuits. If you need panel upgrades during installation, it can add $200–$800 to your project costs. While avoiding gas line work can help keep labor costs down, monthly operating expenses for electric-powered tanks may increase in areas with high utility rates.
Natural Gas Tankless Water Heater Installation
Natural gas models achieve the highest flow rates—up to 11 GPM. These $750–$2,000 units can handle simultaneous demands from showers, dishwashers, and washing machines. The heat exchange provides quick, steady heating, which can offer value in regions with cold incoming water.
For some older homes, installing these units often means upgrading the size of your home’s gas lines from half-an-inch to three-quarters of an inch, adding $400–$800 for materials and labor. Adding venting through walls or roofs costs another $400–$800. As for ongoing maintenance costs, annual descaling can help prevent mineral buildup, which can cost around $100–$500.
How Much Does Tankless Water Heater Installation Cost by Unit Size?
The size of your tankless water heater affects both purchase and installation costs. Your home’s peak hot water demand, measured in gallons per minute (GPM), determines the right unit size. Small households may need 2–3 GPM to cover hot water usage, while larger homes may use 8–10 GPM for multiple bathrooms and appliances. The following chart outlines cost differences across different unit sizes, including flow rates and typical home uses.
| Unit Size | Flow Rate | Typical Use | Cost Range |
|---|---|---|---|
| Point-of-use | 1–2 GPM | Single faucet or appliance | $150–$500 |
| Small whole-house | 2–4 GPM | Small apartment or condo | $500–$1,000 |
| Medium whole-house | 5–7 GPM | 2–3 bedroom home | $1,000–$2,000 |
| Large whole-house | 8–10 GPM | 4+ bedroom home | $1,500–$3,000 |
Note: We determined the above cost ranges using RSMeans data from Gordian and market research.
What Additional Costs Affect Tankless Water Heater Installation?
Besides equipment costs, several factors can influence your total tankless water heater installation price. For example, the type of unit you buy can impact added work and installation requirements. Here’s what to budget for when upgrading your water heater unit:
- Electrical panel work: If you opt for an electric unit, you may need electrical panel updates to meet power supply needs. For example, a new circuit installation can cost $200–$600, while full panel upgrades can reach $1,000–$2,000. Older homes especially may need these updates for sufficient power supply.
- Gas line updates: For gas-powered units, you may have to convert your gas lines to meet operating requirements, which can cost $350–$750. Complex routing or longer pipe runs can add to this expense.
- Venting requirements: Gas units also need stainless steel venting through walls or roofs, costing $400–$800 including materials and weatherproofing.
- Removal services: Taking out your old water heater can cost $100–$500, varying by tank size and location. Technicians in some areas may also charge extra disposal fees.
- Code compliance: As with other home systems, installing a tankless water heater often requires following local building codes and permits. Building permits cost $50–$200 with some locations requiring separate electrical and plumbing permits. Additionally, safety inspections can add $74–$150.
You can also check our water heater installation costs guide to plan your budget.
Tankless vs. Standard Water Heaters
Understanding the types of water heaters available can help you choose the right unit for your home. Tankless units use heat exchangers for on-demand heating, while tank models store 40–80 gallons of pre-heated water for use. Equipment purchase and installation runs $1,200–$3,500 for tankless heaters versus $800–$1,500 for traditional tanks. Tankless models use 24%–34% less energy when households use up to 41 daily gallons, according to ENERGY STAR.
Conventional tank heaters last 8–12 years with operating costs of $440–$580 per year. Alternatively, tankless units last around 15–20 years, costing $300–$540 per year for electric models and $192–$264 for gas models. Despite higher upfront costs, tankless systems offer longer lifespans and more energy savings over time.
Each style of water heater also has practical considerations. Tankless heaters only need three square feet of wall space. Tank models need more room but handle peak demands better since water is pre-stored in the unit. Conventional tanks work during power outages for this reason but need more frequent replacement, which can add to long-term costs. Tankless units require yearly descaling to prevent mineral buildup, which can add a few hundred dollars to your annual budget.
DIY vs. Professional Water Heater Installation
While you may consider a do-it-yourself (DIY) water heater installation to save money, our team recommends hiring a professional. Installing tankless water heaters requires expertise in plumbing, electrical, and gas systems. Choosing a professional installation also maintains the unit’s warranty coverage, which may become void if you attempt the project yourself, and ensures your safety. Gas and vent line mistakes risk fires and carbon monoxide exposure, while electrical errors can cause fires. Licensed installation adds $500–$1,500 to total costs but guarantees safe operation.
While some handy homeowners might feel comfortable installing small electric point-of-use units, whole-house systems require licensed professionals for gas lines, venting, and electrical work. A certified plumber can provide the following services:
- Correct gas line sizing
- Safe electrical connections
- Code-compliant venting
- Water pressure testing
- Required permits
- System calibration
- Drainage setup
- Safety verification
While some homeowners may attempt the installation themselves for a small electric units, note that doing so requires the following tools and hardware:
- Pipe wrenches
- Adjustable wrenches
- Screwdrivers
- Wire strippers
- Voltage tester
- Pipe cutter
- Solder and torch
- Mounting hardware
- Pipe fittings
- Teflon tape
How Can You Save on Tankless Water Heater Installation Costs?
The 30% federal tax credit, which homeowners can claim for efficiency-focused home improvements, offers up to $600 back on gas units rated with an 0.95 energy factor or higher. Many utility companies also offer $100–$300 rebates for efficient systems. If your current water heater shows signs of failure, these incentives can help offset replacement costs.
You can also consider the following factors when looking for savings:
- Seasonal timing: Buying a water heater during the fall or spring can result in 10%–20% off in retailer discounts.
- Right-sizing: Calculating the right size water heater for your home can ensure you don’t over pay for equipment and, if you end up needing a smaller system, help save on labor.
- Package deals: Combining water heater work with other plumbing repairs you may need around your home can save on your total labor costs.
- Multiple bids: We recommend getting three quotes from licensed plumbers—prices can vary by $500 or more for identical work.
- Regular care: Annual system cleaning costs $100–$200 but can help prevent costly repairs in the long run.
- Local incentives: State and city programs offer $20–$1,000 in added savings through rebates and other energy-related incentives.
- Brand offers: Companies such as Rheem and Rinnai regularly provide $100–$400 rebates on new units, based on our market research.
How Does a Tankless Water Heater Work?
First, cold water enters the tankless water heater when you turn on a hot water tap in your home. Then, a flow sensor triggers gas burners or electric elements, heating water through a heat exchanger. The process works instantly, eliminating storage tanks. Internal computers adjust heating power based on incoming water temperature and demand.
Gas models outperform electric ones in flow rate, or how much hot water is being delivered. Gas units deliver 8–10 GPM while electric versions manage 3–8 GPM depending on power levels. These rates matter if you want to use various appliances at the same time—for example, showers use 2 GPM while washing machines need about 3 GPM.
A tankless water heater has temperature sensors and computerized controls that maintain consistent output. Unlike storage tanks that can run dry, tankless units provide endless hot water within their flow capacity. Correct sizing for your home prevents temperature swings when running multiple fixtures at once.
Advice From a Homeowner
A member of our team who lives in Indiana recently had a tankless water heater installed in his home. He installed the water heater for $2,800 last year and has already noticed benefits, including a $25–$30 decrease in monthly gas bills and a continuous water supply for his family of four.
While the team member noticed a short, 3–5 second delay before hot water arrives at the tap, a plumber explained this is because the unit needs this time to start heating. The team member has found a small trade-off for unlimited back-to-back showers with warm water in his home.
Our team member recommends that homeowners get multiple installation quotes and verify their gas line size before purchasing a tankless water heater. His upgrade needed an extra $500 in gas line work. He also does annual maintenance himself to save money, which involves an hour of flushing the unit with vinegar to keep it running efficiently.
Is Tankless Water Heater Installation Worth It?
For most homeowners, a tankless water heater is worth the cost. However, the value depends on your household needs and long-term plans. The $1,200–$3,500 installation cost can pay itself back with lower utility bills and a doubled lifespan compared to conventional units. Most homes cut energy use by 24%–34%, with units lasting 15–20 years versus 8–12 for standard tanks.
Installing a tankless water heater may make more sense for people planning to stay in their current home for five or more years, households with high water heating costs, or families with increased hot water needs. Generally, gas offers more benefits for homeowners in cold climates and large houses, while electric models fit warm regions and smaller households better. If you’re looking for savings, we recommend factoring in your household’s energy rates, available rebates, and tax credits when deciding on a unit.
FAQs About Tankless Water Heater Installation Costs
What is the downside of a tankless water heater?
Tankless water heaters can have high upfront costs of around $1,200–$3,500 with installation, possible electrical upgrades, and yearly maintenance needs. This could present a downside for homeowners on a budget. Homeowners may also notice a brief 3–5 second delay for hot water delivery when turning on their taps.
Why is tankless water heater installation so expensive?
Installing a tankless water heater can require gas line upgrades, electrical modifications, and specialized venting—all of which can increase costs. Professional labor also runs from $500–$1,500 due to complex installation requirements.
Does a tankless water heater affect your electric bill?
It depends on the type of tankless water heater you install. Switching from a gas to an electric tankless water heater adds $25–$45 monthly in electricity costs. However, replacing an electric tank model cuts water heating energy usage by 24%–34%.
