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Updated Oct 20, 2026 Β· By Michael Gonzales Β· Prices from HomeGuide and NerdWallet; efficiency from the U.S. Department of Energy
Disclosure: 1-800Deals is a contractor directory. We don't run any rebate program, and listings never change the facts on this page.
Short answer: A tankless water heater costs $1,400 to $5,600 installed, according to HomeGuide's January 2026 cost guide. Electric units run $1,400 to $3,000 and natural gas $2,100 to $5,600. The extra cost usually comes from upgrades: a new circuit or panel, a bigger gas line or new venting. Payback depends on how much hot water you use.
Get local quotes from water heater installers and check rebates first with our rebate finder by ZIP code.
How much does a tankless water heater cost?
| Fuel type | Unit only | Installed |
|---|---|---|
| Electric | $600 β $1,000 | $1,400 β $3,000 |
| Propane | $1,000 β $2,000 | $1,600 β $4,500 |
| Natural gas | $1,500 β $2,600 | $2,100 β $5,600 |
Source: HomeGuide, tankless water heater cost, January 2, 2026.
NerdWallet's 2026 guide puts tankless at $1,400 to $3,900 and says Home Depot lists an average of $4,300 for a tankless installation, against $1,950 for a tank (NerdWallet). The gap between sources is normal. Your quote depends on what your house already has.
What adds to the cost of a tankless install?
HomeGuide breaks a typical job down like this:
| Item | Typical cost |
|---|---|
| Unit | $600 β $2,600 |
| Installation labor (3 to 10 hours) | $600 β $2,500 |
| Pipes, connectors and valves | $150 β $300 |
| Permits | $50 β $200 |
Then there are the upgrades. These are where tankless quotes jump:
- Dedicated electrical circuit: $250 to $900. Electric tankless units draw a lot of power.
- New electrical panel: $850 to $1,700, if your panel can't handle the load.
- Larger gas line: $350 to $2,000. Gas tankless units often need more gas than a tank did.
- Venting changes: gas units need venting, and switching from a tank often means new vent pipe.
Ask every installer to list these separately. If one quote is much lower, it's often because it leaves an upgrade out. If you need electrical work, our directory lists electricians too.
What size tankless water heater do you need?
Tankless units are sized by flow, in gallons per minute (GPM), not by tank size. HomeGuide's rule of thumb:
| Hot water at the same time | Suggested size |
|---|---|
| 1 to 2 fixtures (a shower and a sink) | 3.5 GPM minimum |
| 2 to 3 fixtures (shower, sink and dishwasher) | 5 GPM |
| 3 to 4 fixtures (several showers, laundry and kitchen) | 7 GPM or more |
Colder incoming water means you need more capacity for the same flow, so a home in Minnesota needs a bigger unit than the same home in Florida. Your installer should size it for your groundwater temperature, not just the number of bathrooms.
How much does a tankless water heater save?
Less than the ads suggest for big households, and more for small ones. The U.S. Department of Energy says tankless units can be 24% to 34% more energy efficient than a standard tank for homes that use 41 gallons or less of hot water a day, and 8% to 14% more efficient for homes that use about 86 gallons a day (DOE Energy Saver, archived).
HomeGuide's yearly energy cost estimates show how close the two can be:
| Tankless | Tank | |
|---|---|---|
| Gas, per year | $220 β $480 | $250 β $420 |
| Electric, per year | $340 β $540 | $530 β $600 |
| Lifespan | 15 β 20 years | 8 β 12 years |
The lifespan line matters as much as the energy line. A tankless unit can outlast a tank by several years, so over 20 years you may buy one tankless unit instead of two tanks.
How long does a tankless water heater take to pay for itself?
Here's the math with example numbers. Plug in your own quotes and bills.
- Find the extra upfront cost. Say a tankless install is quoted at $3,500 and a new tank at $2,000. The difference is $1,500.
- Estimate the yearly savings. Say you spend $400 a year heating water with gas, and you're a small household. At DOE's 24% to 34%, that's roughly $96 to $136 a year.
- Divide. $1,500 Γ· $96 to $136 β 11 to 16 years.
That's slow, but it's inside a tankless unit's 15- to 20-year lifespan, and it ignores the cost of replacing a tank partway through. Payback gets faster if your energy rates are high, if you'd need a new tank soon anyway, or if a rebate covers part of the upgrade.
It gets slower if you need a new panel or gas line, or if your household uses a lot of hot water.
Are there tax credits or rebates for tankless water heaters in 2026?
Not the federal credit. The 25C energy efficiency credit ended for equipment installed after December 31, 2025. If yours went in during 2025, you can still claim it on your 2025 return. Our 25C credit explainer covers how.
Some gas utilities may offer rebates on high-efficiency tankless units. Check yours with the rebate finder, and read how utility rebates work. If you're open to a heat pump water heater instead, it may qualify for state HEAR rebates; see heat pump water heater rebates.
Is a tankless water heater worth it?
It's often worth it if:
- You have a small household and modest hot water use.
- You plan to stay in the house long enough to see the payback.
- You already have a big enough gas line or electrical service.
- You want the space a tank takes up, or you keep running out of hot water.
It's often not worth it if:
- You need a new panel or gas line on top of the unit.
- You'll move in a few years.
- Several people shower at once and you'd need a large, expensive unit.
How to get an accurate tankless quote
- Get at least three quotes from licensed plumbers or water heater installers.
- Ask each one for the exact model, its GPM rating and your sizing assumptions.
- Ask for upgrades (circuit, panel, gas line, venting) and permits as separate lines.
- Ask whether removal and disposal of the old tank is included.
- Ask about descaling. Hard water builds up in tankless units, and HomeGuide notes they need routine flushing.
Or let us find pros for you: get matched with local installers.
Frequently asked questions
How much does it cost to install a tankless water heater? $1,400 to $5,600 installed, per HomeGuide. Electric is $1,400 to $3,000, propane $1,600 to $4,500 and natural gas $2,100 to $5,600.
Why is a tankless water heater so expensive to install? Because the unit often needs upgrades a tank doesn't: a dedicated circuit ($250 to $900), sometimes a new panel ($850 to $1,700), a larger gas line ($350 to $2,000) or new venting.
Does a tankless water heater save money? Usually some. DOE says it can be 24% to 34% more efficient for homes using 41 gallons a day or less, but only 8% to 14% for homes using around 86 gallons.
How long does a tankless water heater last? 15 to 20 years with maintenance, per HomeGuide, compared with 8 to 12 years for a tank.
Is there a tax credit for tankless water heaters in 2026? No federal credit for new installs. The 25C credit ended for equipment installed after Dec 31, 2025. Check your utility for rebates.
What size tankless water heater do I need? About 3.5 GPM for one to two fixtures at once, 5 GPM for two to three and 7 GPM or more for three to four, per HomeGuide.
Sources
HomeGuide: Tankless water heater cost (Jan 2, 2026) Β· NerdWallet: Water heater cost in 2026 Β· U.S. DOE Energy Saver: Tankless or demand-type water heaters (archived Dec 30, 2024) Β· 1-800Deals: 25C credit explainer. Checked October 19, 2026.