A tankless water heater costs $1,200–$5,500 installed in 2026, with the national average at $3,100 for a gas condensing whole-home unit and $1,800 for an electric whole-home unit. The unit itself is only 30–50% of the total cost — installation labor, gas or electrical upgrades, venting, and permits make up the rest.
Here is every cost you will encounter, broken down by heater type, installation scenario, and region.
2026 Average Costs at a Glance
These ranges represent standard installations. Complex retrofits involving gas line upsizing, electrical panel upgrades, or rerouted venting can push costs higher.
Unit Costs by Brand and Model
Buying tip: Plumbing supply houses often sell units $100–$200 cheaper than big-box retailers. Your plumber may get contractor pricing that beats both. Ask your installer for a bundled unit-plus-labor quote before buying the unit separately.
Installation Cost Deep Dive
Installation is where costs vary the most. A straightforward replacement with existing infrastructure can cost $800. A ground-up retrofit with gas line upgrades and new venting can hit $4,000+.
Gas Tankless Installation Costs
Total gas installation labor plus materials: $1,050–$5,350. The typical range for a standard condensing retrofit is $1,500–$2,500.
Electric Tankless Installation Costs
Total electric installation labor plus materials: $560–$5,670. Without a panel upgrade, typical installs run $800–$1,500.
Panel upgrade is the wild card. If your home has a 100A or 125A panel, adding a whole-home electric tankless (27–36 kW) almost always requires upgrading to 200A. This single line item adds $1,500–$3,000 to the project. Have an electrician evaluate your panel capacity before committing to electric tankless.
Regional Cost Variations
Labor rates vary dramatically by metro area. Here's how installation costs scale across the country:
Rural areas have a wide range because while labor rates are lower, contractor availability is limited and travel charges add up. Some rural homeowners report 2–4 week waits for qualified tankless installers.
New Construction vs Retrofit Costs
Installing tankless during new construction is significantly cheaper than retrofitting. The infrastructure (gas lines, venting, electrical circuits) is planned and run before walls are closed.
The cheapest retrofit is a like-for-like replacement: gas tankless replacing gas tankless at the same location, reusing existing gas lines and venting. Add $500–$2,000 for any location change, fuel-type switch, or infrastructure upgrade.
Tax Credits and Rebates (2026)
Federal: Inflation Reduction Act Section 25C
The IRA offers a 30% tax credit, up to $2,000 per year, on qualified high-efficiency water heaters. To qualify, tankless units must have a UEF of 0.95 or higher. This includes all electric tankless models and gas condensing models from Navien, Noritz, Rinnai (RU series), and Rheem (RTGH series).
Non-condensing gas units (UEF 0.80–0.85) do not qualify.
Credit calculation example: Navien NPE-2 240S costs $1,750. 30% credit = $525. The credit applies to the unit cost only, not installation labor. However, the IRS defines "qualified expenditures" to include some labor for installation of the qualifying property.
Federal: HEEHRA Rebates
The High-Efficiency Electric Home Rebate Act provides point-of-sale rebates (not tax credits) for income-eligible households. Electric water heaters qualify for up to $1,750 in rebates. Eligibility depends on household income relative to area median income. Check your state's program status, as HEEHRA rollout varies by state.
State and Utility Rebates
Many utilities and state energy offices offer additional rebates stacking on top of federal credits:
Stacking strategy: You can combine the federal 30% tax credit with state rebates and utility rebates. On a $1,800 condensing gas unit, that could mean: $540 federal credit + $300 utility rebate + $200 state rebate = $1,040 total savings, dropping your effective unit cost to $760.
Cost vs Savings: The Payback Math
The real question is not "how much does it cost?" but "how fast does it pay for itself?" Here are four scenarios:
Scenario 1: Gas Condensing Replacing a Gas Tank (Moderate Climate)
- Installed cost: $3,500
- IRA tax credit: $525
- Net cost: $2,975
- Annual energy savings vs 50-gallon gas tank: $180
- Payback period: 16.5 years
Scenario 2: Gas Condensing Replacing a Gas Tank (Cold Climate)
- Installed cost: $4,200
- IRA tax credit: $540
- Net cost: $3,660
- Annual energy savings: $240 (higher usage in cold climate)
- Payback period: 15.3 years
Scenario 3: Electric Replacing an Electric Tank (Warm Climate)
- Installed cost: $1,800
- IRA tax credit: $165
- Net cost: $1,635
- Annual energy savings vs 50-gallon electric tank: $200
- Payback period: 8.2 years
Scenario 4: Gas Condensing in New Construction (vs Tank Alternative)
- Incremental cost over a gas tank install: $1,200
- IRA tax credit: $525
- Net incremental cost: $675
- Annual energy savings: $180
- Payback period: 3.8 years
The new-construction advantage: When building new, the incremental cost of tankless vs tank is only $800–$1,500 (because you need water heating either way). With tax credits, the payback drops to 3–5 years. In retrofits, the payback stretches to 10–17 years because you are paying full installation costs on top of a functioning system.
Hidden Costs to Budget For
Beyond the unit and installation, these ongoing costs affect total ownership:
Annual maintenance budget: $80–$250 for gas units, $30–$80 for electric.
DIY vs Professional Installation
What You Can DIY
Point-of-use electric units under 13 kW are the only tankless heaters suitable for DIY installation, and only if you are comfortable with 240V electrical work. The plumbing connections (two flexible hoses) are straightforward. The electrical work (running a dedicated 50–60A circuit from the panel) requires knowledge of wire sizing, breaker selection, and local code.
Estimated DIY cost savings: $200–$500 on a point-of-use unit.
What Requires a Professional
Gas tankless, whole-home electric, and any unit requiring new gas lines, venting, or panel upgrades must be installed by licensed professionals. Most manufacturers void the warranty if the unit is not installed by a licensed contractor. A gas installation done incorrectly poses carbon monoxide poisoning risk, and an electrical installation done wrong creates fire hazard.
Real-World Cost Examples
Example 1: Budget Install — Phoenix, AZ
Unit: EcoSmart ECO 27 (27 kW electric) — $480
Installation: Electrician ran three 40A circuits from existing 200A panel with 95A available capacity. 15-foot wire run. No panel upgrade needed.
Total installed: $1,450 (unit $480, electrician $650, materials $220, permit $100). After IRA credit: $1,306.
Example 2: Mid-Range Install — Raleigh, NC
Unit: Rinnai RU160iN (gas condensing, 160,000 BTU) — $1,500
Installation: Existing 1/2-inch gas line upgraded to 3/4-inch (20-foot run). PVC venting through exterior wall. Condensate drain to utility sink.
Total installed: $3,400 (unit $1,500, plumber $1,100, gas line $450, venting $200, permits $150). After IRA credit: $2,950.
Example 3: Premium Install — Chicago, IL
Unit: Navien NPE-2 240S (gas condensing, 199,900 BTU) with recirculation — $1,800
Installation: New 3/4-inch gas line from meter (35-foot run). Concentric PVC venting through roof. Condensate neutralizer and drain. Dedicated 120V outlet.
Total installed: $4,800 (unit $1,800, plumber $1,600, gas line $750, venting $350, electrical $150, permits $150). After IRA credit: $4,260.
Example 4: Complex Retrofit — San Francisco, CA
Unit: Two Navien NPE-2 240S units in parallel — $3,600
Installation: 1-inch gas line from meter (40-foot run). Dual concentric venting. Cascade control kit. Recirculation plumbing to 4 bathrooms. High-cost-of-living labor rates.
Total installed: $9,200 (units $3,600, plumber $3,200, gas line $1,000, venting $600, cascade/recirc $400, permits $400). After IRA credits: $8,120.
Key Takeaways
- National average installed cost: $3,100 for gas condensing, $1,800 for electric whole-home
- The unit is 30–50% of total cost — budget for installation, infrastructure, and permits
- Gas line and panel upgrades are the biggest cost variables — $800 for gas line upsizing, $1,500–$3,000 for panel upgrade
- IRA tax credit saves $400–$600 on qualifying units (UEF 0.95 or higher)
- Stack federal, state, and utility rebates to cut effective cost by $700–$1,200
- New construction is 30–40% cheaper than retrofit due to pre-planned infrastructure
- Budget $80–$250 per year for maintenance (descaling, inspections, filters)
- Payback ranges from 4 years (new construction) to 17 years (cold-climate retrofit)
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