A tankless water heater saves $120–$350 per year on energy compared to a standard tank heater, but costs $1,000–$4,000 more to install. Over a 20-year period, tankless typically has a lower total cost of ownership — primarily because you avoid buying a second tank when the first one dies at 8–12 years.
The right choice depends on your budget, hot water demand, home infrastructure, and how long you plan to stay. Here is every number you need.
Complete Side-by-Side Comparison
Energy Cost Comparison: The Real Numbers
The DOE estimates that water heating accounts for 14–18% of a home's energy bill. Here is what each type costs to operate annually:
Annual savings going tankless:
- Gas tank to gas condensing tankless: $90–$135/year
- Electric tank to electric tankless: $90–$100/year
- Gas tank to gas non-condensing tankless: $65–$95/year
Heat pump water heaters are the most energy-efficient option, beating both tank and tankless. If your primary goal is minimizing energy cost, a heat pump water heater (COP 3.0–4.0) saves $150–$300/year more than even a condensing tankless. The trade-off: heat pumps have a tank (limited supply), take up the most space, and work poorly in cold spaces below 40F.
The 20-Year Total Cost of Ownership
This is the most important analysis. A tankless unit lasts 15–20 years; a tank lasts 8–12 years. Over 20 years, you will buy one tankless unit or two tank units (plus the installation for the second one).
The verdict: Over 20 years, tankless saves $1,025–$2,665 compared to tank — and that is with conservative assumptions. Electric tankless has the strongest 20-year advantage because it combines low unit cost, no second unit purchase, and zero venting costs.
Sensitivity Analysis: What If the Numbers Change?
The two biggest risks to the tankless value proposition: (1) hard water significantly shortening lifespan (solved by descaling), and (2) very low hot water usage reducing the savings floor.
Performance Comparison
Hot Water Availability
Tank: Delivers first-hour rating (60–80 gallons) at full pressure and temperature, then needs 30–60 minutes to recover. A 50-gallon gas tank recovers at 40–50 gallons per hour; electric recovers at 20–25 GPH. Three back-to-back showers (30 gallons total) is fine. Four might run cold.
Tankless: Delivers unlimited hot water at its rated GPM, continuously. No recovery period, no running out. However, the flow rate is the hard limit. A gas condensing unit delivering 5 GPM serves two showers simultaneously. An electric unit at 2.7 GPM serves one.
Winner: Tankless for continuous demand. Tank for high-flow, short-burst demand (filling a bathtub fast, then nothing for an hour).
Response Time
Tank: Hot water is already stored and ready. Open a faucet, and the only delay is the time for hot water to travel through the pipes. If the heater is 20 feet from the faucet, that is 8–12 seconds.
Tankless: The unit needs 2–3 seconds to detect flow and fire the burner, plus pipe travel time. Total delay: 10–20 seconds to reach full temperature. Some users notice a "cold-water sandwich" effect between uses.
Winner: Tank, marginally. Tankless with a recirculating pump matches tank response time.
Peak Capacity
Tank (50-gallon gas): First-hour delivery of 70 gallons covers simultaneous showers, dishwasher, and laundry if started within the first hour. After that, you wait.
Gas tankless (condensing): 5.4 GPM at 77F rise means 324 gallons per hour continuously — as long as you do not exceed 5.4 GPM simultaneously. Far more total hot water, but flow-rate-limited.
Electric tankless: 2.7 GPM at 77F rise means 162 gallons per hour. Less than a gas tank's first-hour delivery, but never runs out.
Winner for large families: Gas tankless (unlimited at high GPM). Winner for small households: Either works.
Installation Comparison
Tank installation is the simplest. Most plumbers can swap a tank in 2–3 hours using existing connections. Tankless installation involves more infrastructure changes, especially for gas-to-tankless conversions.
Maintenance Comparison
Tank Maintenance
- Annual flush: Drain sediment from the bottom. DIY in 20 minutes or $100–$150 for professional service.
- Anode rod inspection: Check every 2–3 years, replace when depleted ($20–$50 for the rod). This sacrificial rod protects the tank from corrosion. Neglecting it shortens tank life by 3–5 years.
- Temperature and pressure valve test: Annual check, 2-minute job.
Reality: Most homeowners never flush their tank or check the anode rod. Tanks fail earlier as a result.
Tankless Maintenance
- Annual descaling: Flush the heat exchanger with vinegar or commercial descaler using a pump kit. DIY in 45 minutes ($30–$60 for a kit) or $100–$200 for professional service.
- Gas burner inspection (gas only): Check for soot, debris, proper flame. Part of annual service.
- Inlet filter cleaning: Remove and rinse the mesh filter every 6 months. 5-minute job.
- Condensate drain check (condensing gas only): Ensure the drain is clear and the neutralizer has media.
Reality: Tankless maintenance is less forgiving than tank maintenance. Skipping descaling in hard water areas can destroy a $2,000 unit in 5–7 years.
Real-World Comparison Examples
Example 1: Family of 4 in Atlanta, GA — Gas
Tank option: AO Smith 50-gallon gas tank. UEF 0.65. Installed: $1,800. Annual energy: $330. Lifespan: 10 years.
Tankless option: Rinnai RU160iN condensing. UEF 0.93. Installed: $3,400. Annual energy: $225. Lifespan: 18 years.
10-year comparison: Tank: $1,800 + $3,300 energy + $500 maintenance = $5,600. Tankless: $3,400 + $2,250 energy + $1,500 maintenance - $450 tax credit = $6,700.
At 10 years, the tank is cheaper. But the tank now needs replacing ($1,800 again) while the tankless runs for 8 more years.
20-year comparison: Tank: $5,600 + $1,800 (2nd unit) + $3,300 energy (years 11–20) + $500 maintenance = $11,200. Tankless: $6,700 + $2,250 energy (years 11–20) + $1,500 maintenance = $10,450. Tankless saves $750 over 20 years, plus unlimited hot water and zero flood risk.
Example 2: Couple in San Diego, CA — Electric
Tank option: Rheem 40-gallon electric tank. UEF 0.93. Installed: $950. Annual energy: $420 (CA electricity is expensive). Lifespan: 10 years.
Tankless option: EcoSmart ECO 27. UEF 0.99. Installed: $1,700. Annual energy: $340. Lifespan: 20 years.
20-year comparison: Tank: $950 + $950 (2nd unit) + $8,400 energy + $600 maintenance = $10,900. Tankless: $1,700 + $6,800 energy + $600 maintenance - $165 credit = $8,935. Tankless saves $1,965 over 20 years.
Example 3: Single Person in Minneapolis, MN — Gas
Tank option: Bradford White 40-gallon gas. UEF 0.67. Installed: $1,600. Annual energy: $280 (low usage). Lifespan: 11 years.
Tankless option: Navien NPE-2 180S. UEF 0.96. Installed: $3,800. Annual energy: $175. Lifespan: 20 years.
20-year comparison: Tank: $1,600 + $1,600 (2nd unit) + $5,600 energy + $600 maintenance = $9,400. Tankless: $3,800 + $3,500 energy + $2,400 maintenance - $525 credit = $9,175. Nearly identical. For a low-usage household in a cold climate, the financial case for tankless is marginal. The deciding factors become non-financial: unlimited hot water, space, and flood risk prevention.
Key Takeaways
- Tankless saves $1,000–$2,700 over 20 years in most scenarios, primarily by avoiding a second tank purchase
- Annual energy savings: $90–$135 (gas) or $90–$100 (electric) — meaningful but not dramatic
- Tank is cheaper upfront by $1,000–$4,000 depending on type
- Tankless wins on lifespan (15–20 years vs 8–12), unlimited hot water, space, and flood risk
- Tank wins on simplicity — easier and cheaper to install, less maintenance-dependent
- The strongest tankless case: replacing a failed tank, new construction, vacation homes, large families
- The weakest tankless case: low-usage households, very cold climates with electric, homes where the current tank is under 5 years old
- Heat pump water heaters beat both on operating cost — consider HPWH if space and climate allow
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