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Cost by water heater type
The type of heater is the biggest factor in your bill. These prices include the unit and installation.
| Type | Installed cost | Typical lifespan |
|---|---|---|
| Tank (storage) | $600-$2,500 | 8-12 years |
| Tankless (on demand) | $1,000-$4,000 | 15-20 years |
| Heat pump (hybrid) | $1,200-$4,600 | 13 years* |
| Indirect (runs off a boiler) | $1,200-$4,500 | Longest of the group |
Source: Fixr, Jan 2026. *Heat pump lifespan is the figure ENERGY STAR uses in its savings estimates.
Fixr’s national average is about $1,400 for a typical replacement. NerdWallet’s figures are close: $600 to $2,500 for a tank and $1,400 to $3,900 for tankless. It also cites Home Depot’s average total installation cost of about $1,950 for a tank and $4,300 for tankless.
A tank keeps 30 to 80 gallons hot at all times. A tankless unit heats water only when you open a tap, and it costs roughly twice as much as a tank, per Fixr. A heat pump water heater looks like a tank but pulls heat from the surrounding air, which makes it far cheaper to run.
Gas vs electric vs heat pump
Fuel type matters for both the install price and the monthly bill.
| Fuel | Installed cost |
|---|---|
| Electric | $500-$3,500 |
| Natural gas | $700-$2,700 |
| Propane | $700-$2,500 |
| Oil (usually indirect) | $1,200-$4,500 |
| Solar | $1,700-$5,500 |
Source: Fixr, Jan 2026.
For a standard tank, NerdWallet says electric, propane and gas units start at similar prices. The cost jumps if you need a new gas line or electrical upgrades. For tankless units, gas models generally cost significantly more than electric ones.
Heat pump water heaters are electric, but the Department of Energy says they can be 2 to 3 times more efficient than a conventional electric water heater. They need a space that stays between 40°F and 90°F all year with at least 1,000 cubic feet of air around the unit, so check your space before you choose one.
Cost by tank size
Size is set by how many people use hot water at the same time.
| Tank size | Household | Installed cost | Unit only |
|---|---|---|---|
| 30 gallons | 1-2 people | $550-$2,100 | $430-$2,100 |
| 40 gallons | 1-4 people | $550-$2,300 | $440-$2,300 |
| 50 gallons | 3-5 people | $700-$2,500 | $530-$2,900 |
| 75 gallons | 4-6 people | $1,100-$3,400 | $1,100-$3,100 (75-80 gal) |
| 80 gallons | 6+ people | $1,200-$3,600 | $1,100-$3,100 (75-80 gal) |
Sources: Fixr, Jan 2026 (installed cost and household); NerdWallet, Sep 2025 (unit only).
The two sources do not line up perfectly because they sampled different products, but the pattern is the same: going up one size usually adds a few hundred dollars. Match the size to your household rather than buying the biggest tank.
Installation, permits and extra costs
Labor is a large part of the bill. Fixr says it makes up 18% to 50% of the total, or about $300 to $1,500.
| Item | Typical cost |
|---|---|
| Labor, tank | $150-$450 |
| Labor, tankless | $600-$1,900 |
| Switching from tank to tankless | $150-$2,500 extra |
| Permit | $25-$300 |
| Old unit removal and disposal | $75-$500 |
| Power venting (gas without chimney) | $300-$1,000 |
Sources: NerdWallet, Sep 2025 (labor, switching, permit); Fixr, Jan 2026 (removal, venting).
Permits can go much higher, up to $1,500 per Fixr, when the job includes a new gas line, electrical work or major plumbing changes. Code add-ons such as drain pans and seismic straps also add to the price. Many plumbers include haul-away in their quote, so ask before you pay for it twice.
Yearly energy cost and lifespan
The Department of Energy says water heating is about 18% of a home’s energy use, so efficiency shows up on every bill. ENERGY STAR estimates what a certified heat pump water heater saves compared with a standard electric tank:
| Household size | Savings per year | Payback | Lifetime savings |
|---|---|---|---|
| 2 people | $270 | 5.5 years | $2,050 |
| 3 people | $410 | 3.7 years | $3,830 |
| 4 people | $550 | 2.7 years | $5,610 |
Source: ENERGY STAR, page undated, using electricity at $0.146 per kWh, a $1,503 higher purchase price and a 13-year life.
For a family of four, $550 a year comes to about $46 a month (our calculation). The savings shrink if your power is cheap or your household is small, so a two-person home waits more than five years to break even.
Lifespan matters too. If a $1,400 tank lasts 10 years, it costs about $140 per year of use (our calculation, using Fixr’s average). A tankless unit at the top of its price range can still come out ahead per year if it reaches the 15 to 20 years Fixr reports.
How to pay less
- Replace before it fails. A leaking tank forces a rushed decision. If yours is near the end of its lifespan, get quotes now.
- Stick with the same fuel and location. Moving the heater or switching fuel means new gas, venting or electrical work, which drives up labor and permits.
- Get three quotes with the same scope. Ask for the unit, labor, permit, haul-away and code upgrades as separate lines.
- Look for utility rebates. The federal Energy Efficient Home Improvement Credit (which covered 30% of a heat pump water heater, up to $2,000) only applies to equipment placed in service through December 31, 2025, per the IRS. Many utilities still offer rebates, and ENERGY STAR has a rebate finder.
- Budget for big home systems together. A water heater is the small one. See our guides to HVAC replacement cost and roof replacement cost, and use the emergency fund calculator to plan for surprises.
See how we research every number on our method page, or browse more home and repair costs.
Common questions
How long does a water heater last?
Fixr puts tank water heaters at 8 to 12 years and tankless units at 15 to 20 years. NerdWallet gives a slightly longer 10 to 15 years for tanks and 20 years or more for tankless.
Is a tankless water heater worth it?
It costs more up front, $1,000 to $4,000 installed per Fixr, versus $600 to $2,500 for a tank. It lasts longer, so it can make sense if you will stay in the home many years, but switching from a tank can add $150 to $2,500 in installation work, per NerdWallet.
Do I need a permit to replace a water heater?
Usually, yes. NerdWallet puts typical permit fees at $25 to $300, and Fixr says they can reach $1,500 when new gas lines or electrical work are involved.
Is there a federal tax credit for a heat pump water heater in 2026?
No. The IRS says the Energy Efficient Home Improvement Credit only covers property placed in service through December 31, 2025. Check your utility for rebates instead.
Sources
Every number above comes from these pages. We list the date each page showed when we checked it.
- Fixr, How Much Does Water Heater Installation Cost?
- NerdWallet, Water Heater Cost
- ENERGY STAR, Heat Pump Water Heaters Benefits and Savings
- U.S. Department of Energy, Energy Saver, Water Heating
- IRS, Energy Efficient Home Improvement Credit
Estimates are for general information only. Get written quotes from licensed local pros before you decide.
- Passed Level II of the CFA® Program
- Canadian Securities Course (CSC)
- Conduct and Practices Handbook (CPH)
Sepehr Parsa is a financial planner and the founder and editor of DollarMap. He has passed Level II of the CFA Program and completed the Canadian Securities Course (CSC) and the Conduct and Practices Handbook (CPH) course. He writes and edits our guides on cars, home repairs, budgeting, saving and investing, and checks that every number has a source.
“In a slowing economy, a budget is what keeps you afloat.”
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