Tank vs. tankless water heaters

When a water heater wears out, most people replace it with the same kind they had. That's usually the simplest job. But it's also the one moment when switching types is practical, so it's worth knowing the options before the old tank fails.

This guide explains how tank, tankless and heat pump water heaters work, what changes between gas and electric, and how to size one. For what the job costs, see water heater replacement cost.

How a tank water heater works

A tank (or "storage") water heater keeps a tank of water hot all the time, so it's ready the moment you open a faucet. Gas tanks heat the water with a burner under the tank. Electric tanks use heating elements inside it.

Because the tank stays hot around the clock, it loses some heat even when nobody is using water. This is called standby loss. [1]

A tank can also run out. Once you've used most of the hot water, you wait while the tank heats a new supply.

How a tankless water heater works

A tankless heater has no tank. When you open a hot water faucet, a sensor sees the water moving and turns on the burner or electric element. The water heats up as it flows through the unit. [1]

Since it only heats water when you need it, a tankless heater avoids standby loss. [1] It also doesn't run out the way a tank does. The limit is how much hot water it can make at the same time. Tankless heaters are rated in gallons per minute (GPM), not gallons of storage. [2]

If you run two showers and the dishwasher at once, you need a unit big enough for all three. If it's too small, the water gets cooler when you turn on the next fixture.

Heat pump water heaters: a third option

A heat pump water heater (also called a hybrid electric water heater) is an electric tank heater that works like a refrigerator in reverse. It takes heat from the surrounding air and moves it into the water in the tank. When demand is high, it can switch to standard electric heating elements. [10]

It needs the right spot. ENERGY STAR says to install one in a space that stays between 40 and 90 degrees year-round, with about 1,000 cubic feet of air around it. [4] It cools the room it sits in, which can help in a warm garage or basement. In cold weather it may switch to a backup electric mode that uses more energy. [4] It may also need yearly upkeep, like changing an air filter. [4]

Gas or electric

	Gas	Electric
Tank	Needs a gas line and an exhaust vent to the outside	Needs the right electrical circuit
Tankless	Needs enough gas supply and its own vent; condensing models vent through plastic pipe and need a drain for condensation [1] [2]	Makes less hot water per minute at the same temperature; may need a large electrical upgrade

Gas tankless units generally make more hot water at once than electric ones. The U.S. Department of Energy says a typical gas tankless unit can raise water 70 degrees at about 5 gallons per minute. A typical electric unit does that at about 2 gallons per minute. [3] For an electric tankless heater, have an electrician check whether your electrical panel and wiring can handle it. See what kind of electrical panel do I have?

Switching from one fuel to the other adds work. Moving from electric to gas means running a gas line and a vent. Moving from gas to electric may mean a new circuit.

Sizing for your household

For a tank heater, look at the first hour rating. It's printed on the EnergyGuide label as "Capacity (first hour rating)." It tells you how much hot water the heater can supply in a busy hour. [3]

Estimate your busiest hour. The Department of Energy's example: three showers at 20 gallons each, one shave at 2 gallons and hand-washing dishes at 3 gallons add up to 66 gallons. That household needs a first hour rating of 66 gallons or more. [3]

For a tankless heater, add up the flow of everything you'd run at the same time. ENERGY STAR uses these averages: [2]

Fixture	Average flow
Shower or tub	2.5 GPM
Clothes washer	3.3 GPM
Kitchen or bathroom sink	2.2 GPM
Dishwasher	1.3 GPM

Then figure the temperature rise: the difference between the water coming in and the temperature you want. The Department of Energy suggests assuming 50 degree incoming water if you don't know, and 120 degrees out, which suits most uses. That's a 70 degree rise. [3] An installer should confirm the size for your home. [2]

A heater that's too small for the household is a common reason hot water runs out. See insufficient water heater capacity.

What to weigh before switching

Tank: lower cost and a simpler swap. Replacing a tank with a tank usually reuses the same gas line, vent or circuit.

Tankless: more up front, less waiting. Moving to tankless often means a bigger gas line, new venting or electrical work. ENERGY STAR notes the installer has to check whether your gas line is big enough and how the exhaust will be vented, and that the install can take longer than a standard heater. [2] You also get back the floor space a tank uses.

Upkeep is different. A. O. Smith says most tank heaters need flushing at least once a year to clear sediment, more often with hard water. Many tankless heaters need descaling instead, which clears mineral buildup, and the inlet filter should be checked regularly. [5] See how to find and use your water shutoff for basic water heater upkeep.

Permits and code. A water heater install may need a permit, and venting, gas and electrical rules come from your local building code. ENERGY STAR advises confirming your installer can get any local permit needed. [2] Rules differ from place to place, so check with your local building department.

Brands you'll see most

These makers all sell residential water heaters in the U.S.:

A. O. Smith: its homeowner maintenance guide covers both tank and tankless heaters [5]
Rheem: tank, tankless and heat pump models [6]
Bradford White: gas and electric tank, heat pump and tankless models [7]
Rinnai: best known for gas tankless; also sells heat pump models [8]
Navien: condensing and non-condensing tankless, plus a heat pump model [9]

For any brand, the right size and a correct install matter more than the name on the front.

Safety

Gas water heaters burn fuel and vent exhaust, so installing, moving or converting one is work for a licensed plumber. Have a professional handle any change to gas lines, venting or wiring. A new install may also need parts the old heater didn't have, like an expansion tank or a drain pan. See water heater repairs.

HomeCloud is a licensed general contractor that evaluates homes, then prices and does repairs, including water heater replacements. If you'd like to spread out the cost, see your financing options.