Choosing a water heater comes down to four questions: which fuel you have, how much hot water you use at once, what it costs to run, and how long it lasts. This guide answers each one and points to the calculator or guide that goes deeper.
For a typical four-person household at 18 cents per kWh and an assumed $1.35 per therm, a heat pump water heater costs about $334 a year to run, a gas tankless $340, a gas tank $467 and a standard electric tank $1,271. Tanks last 10 to 15 years and tankless units about 20, according to the DOE.
The main types
| Type | How it works | Lifespan (DOE) |
|---|---|---|
| Storage tank, gas or electric | Keeps a tank of water hot | 10 to 15 years |
| Tankless | Heats water as it flows | About 20 years |
| Heat pump | Moves heat from the air into a tank | 10 to 15 years |
| Solar | Collectors heat the water, with a backup | About 20 years |
Running costs
From our water heater sizing calculator, for the default four-person household:
| Type | Energy cost per year |
|---|---|
| Heat pump water heater | $334 |
| Tankless, gas | $340 |
| Tank, gas | $467 |
| Tankless, electric | $1,193 |
| Tank, electric | $1,271 |
ENERGY STAR says a certified heat pump water heater uses less than half the energy of a standard electric storage water heater. See electric water heating cost for costs by state.
Which type fits your situation
The right choice depends on the fuel you already have, how much hot water you draw at once, and how much space the unit gets. This table lines the main types up on the four things buyers weigh, using the running costs and lifespans above and the efficiencies our sizing calculator assumes.
| Type | Energy cost/year (4-person) | Efficiency | Lifespan (DOE) | Install complexity | Best for |
|---|---|---|---|---|---|
| Heat pump | $334 | COP about 3.5 (assumed) | 10 to 15 years | 240V circuit, condensate drain, open air or ducting, extra height | All-electric home with a warm basement or garage |
| Gas tankless | $340 | 0.88 UEF assumed; ENERGY STAR condensing 0.95+ | About 20 years | Full-burner gas line, matched venting, condensate drain on condensing models | Gas home with high simultaneous demand |
| Gas tank | $467 | 0.64 UEF assumed | 10 to 15 years | Gas line and matched venting | Gas home with moderate, bursty use |
| Electric tank | $1,271 | Resistance, COP about 1 | 10 to 15 years | One 240V circuit | Small or low-use homes, tight spaces |
| Solar | Not estimated | Collector-dependent | About 20 years | Roof collectors plus a backup heater | Sunny climate, high hot-water use |
Route by your situation:
- All-electric home: a heat pump water heater runs for about $334 a year here against $1,271 for a resistance tank, the largest gap between any two options on this page. See the heat pump water heater guide.
- Gas available with high simultaneous demand: a gas tankless never runs out and lasts about 20 years; see tankless costs and the tankless guide.
- Limited space or a tight closet: a heat pump unit needs open air and height, so a compact electric or gas tank often fits better.
- Cold incoming water or a cold garage: whole-house electric tankless struggles with large temperature rises, and a heat pump's output falls as the air around it cools, so a gas option is safer.
Tank or tankless?
A tank stores hot water and can run out; a tankless heater never runs out but can only heat so much flow at once. Tankless saves the standby heat a tank loses, which matters more for gas, and lasts longer, but costs more to install. See the tankless guide and tankless costs.
Sizing
- Tanks are sized by first-hour rating, the hot water they can deliver in your busiest hour.
- Tankless heaters are sized by flow rate and temperature rise.
Take the default four-person household, which draws about 112 gallons of hot water a day. The calculator puts 30 percent of that in the busiest hour, about 34 gallons, then adds a 20 percent margin for a first-hour rating near 40 gallons. That points to roughly a 50-gallon gas tank, or a 65-gallon electric or heat pump tank, which reheat more slowly.
For a tankless heater, size on flow and temperature rise instead. The same household needs about 5 gallons per minute, and heating that from 55°F to 120°F is a 65°F rise: 5 × 65 × 500 works out to 162,500 BTU per hour of output. A gas unit at an assumed 88 percent efficiency draws about 184,700 BTU per hour of input, just under the 200,000 BTU per hour federal limit for residential gas models.
Our sizing calculator estimates both, and what size tankless water heater covers flow and temperature rise in detail.
Efficiency ratings
Water heaters are rated by Uniform Energy Factor (UEF) from a federal test, where a higher number means less energy for the same hot water. An electric resistance tank converts nearly all its electricity to heat, so its UEF sits just under 1. A heat pump water heater scores far above 1 because it moves heat into the tank rather than making it; our calculator models it at a coefficient of performance near 3.5, delivering about 3.5 units of heat per unit of electricity.
Gas units read differently because combustion loses heat up the flue. ENERGY STAR-certified condensing gas tankless models are rated 0.95 UEF or higher, while standard gas tanks test well below that. Compare models of the same type and size class, since the label figure is what drives the running cost.
Installation
- Gas: a gas line sized to supply the full burner input, and venting matched to the model, which is PVC for condensing units and stainless steel for most non-condensing ones. Condensing models also need a drain for their acidic condensate.
- Electric: a dedicated 240-volt circuit; whole-house electric tankless units need several very large circuits and often a panel upgrade. See water heater wire size.
- Heat pump: a volume of open air or ducting to that air, a condensate drain, and extra height for the unit on top. A tight closet usually cannot supply enough air, so check the stated air-volume requirement first.
Rebates
The federal 25C tax credit ended after 2025. HEAR rebates cover up to $1,750 of a heat pump water heater for income-qualified households; see HVAC tax credits 2026.
Maintenance and replacement
Flush sediment and check the anode rod on the manufacturer's schedule, and descale tankless units, especially with hard water. ENERGY STAR advises replacing a tank proactively once it's over 10 years old; see how long a water heater lasts.
Frequently asked questions
What is the most efficient type of water heater?
A heat pump water heater, which ENERGY STAR says uses less than half the energy of a standard electric tank. For gas homes, a high-efficiency gas tankless heater is the most efficient gas option.
Is tankless better than a tank?
It lasts longer and never runs out, but costs more to install and has a flow limit. For gas homes with high hot-water use, it often makes sense.
What size water heater do I need?
Size a tank by first-hour rating and a tankless heater by flow and temperature rise. Our sizing calculator does both.
How long do water heaters last?
10 to 15 years for tanks and heat pump water heaters, and about 20 for tankless and solar, according to the DOE.
Which water heater is cheapest to run?
A heat pump water heater, at about $334 a year for the default four-person household on this page, against $1,271 for a standard electric resistance tank. Among gas options a tankless heater is cheapest at about $340 a year, with a gas tank near $467.
Is gas or electric better for a water heater?
It depends on the electric type. A heat pump water heater is usually the cheapest of all at about $334 a year, but a plain electric resistance tank is the most expensive at about $1,271, more than a gas tank's $467. For costs by state, see electric water heating cost.