If you’re thinking of replacing your traditional hot water heating tank, you’ve probably heard about tankless heaters. Wondering if they’re right for you? Here’s a rundown of what you can expect.

Tankless water heaters, also known as on-demand heaters, will provide hot water only as it’s needed. Because the water is heated as it’s used, a tankless model doesn’t produce the energy loss associated with traditional heaters, which must keep the water hot until used.

Tankless heaters can produce hot water only at a given flow rate, usually 2–5 gallons per minute. (Generally speaking, gas-powered heaters produce a higher flow rate than electric ones.) When there’s only one water source running, this usually isn’t a problem. However, if you’re running multiple water flows at the same time, each of them will be slowed down.

Heaters take up much less space than tanks — often about as much as a typical electrical breaker box. They’re considered better for the environment because they last longer and don’t produce a rusty tank that will eventually end up in a landfill.

They also tend to last longer than tanks, and they require less maintenance. Like tanks, heaters need to be flushed once a year to get rid of sediment and mineral buildup, but the procedure is much simpler.

One other advantage: When they break down, tankless heaters won’t have an issue with spilling an entire tankful of water on the floor.


Many tankless heaters qualify for a $300 federal tax credit, if installed before the end of 2021. Some states, localities and utility companies offer benefits for installing tankless systems. Make sure to ask your installer what might be available to you.

The biggest downside of a tankless heater is that it costs much more to install than a tank. Typically, you’ll pay between $1,200 and $3,200 for a tankless heater — around twice as much as a tank, depending on the size of your house. The units are generally in the same price range as a traditional heater, but the engineering and installation to convert a tank system to tankless bumps up the final cost quite a bit.

Depending on your home’s electrical infrastructure, you may have to pay more for the necessary power connections for the heater.

You’ll see an effect on your utility bills after you install a tankless heater, but it may not pay for itself for several years. The U.S. Department of Energy says you can expect an energy savings of between $50 and $100 per year.

If your primary concern is convenience as opposed to energy use, consider installing point-of-use tankless heaters on individual appliances. They’re relatively easy to install and cost between $100 and $300 each. They can heat up water more quickly, and the water only has to travel a short distance. However, each one can only heat a single faucet, bathtub or appliance, so the cost will go up if you outfit the entire house.

You can also choose a solar tankless heater, but it’s the most expensive option, averaging between $3,000 and $10,000 to install.