How much does it cost to replace a water heater?

Water heater replacement costs

Water heaters are less expensive to replace than some other systems, like HVAC systems, but they still represent the second-highest source of energy use in the home. You should expect to spend at least $1,000 for a basic water heater, while opting for a tankless system might cost up to $2,400 or more.

There are also high-efficiency and solar options that run significantly higher — upward of $3,000. Take a look at the top factors that affect the cost of replacing a water heater.

Tank vs. tankless water heater

The biggest factor in your water heater replacement costs will be whether you choose a tankless or tank-based system.

A tank system is easier to install and holds hot water in a tank (anywhere from 30 to 80 gallons). The downside of tank-based heaters is that they take one to two hours to replenish when the hot water runs out. The cost of a standard tank-storage water heater unit averages $400 to $1,600, and installation costs range from $150 to $800.

Tankless systems heat water on demand and can last twice as long as tank systems, but they cost two to three times as much. The cost to install a tankless water heater is higher than the cost of a tank-based system. This is due to the base price of the unit itself ($250 to $3,000) and because of higher labor costs, which are usually between $400 and $1,500.

Licensed plumbers will charge anywhere from $50 to $150 an hour for labor, but not all plumbers will be able to install a tankless system, as it can involve putting in new gas and water lines. On average, it takes eight to 10 hours to install a new tankless system, compared with the two to three hours it takes to install a tank-based system.

According to Sean Richardson, owner of Complete Plumbing Solutions in Ireland: “Tankless water heaters usually have a higher upfront cost, but they typically have a longer life span and are more energy-efficient, resulting in lower long-term costs. Ultimately, the decision between a tankless and tank-style water heater should be based on your specific needs and budget.”

Fuel type

The type of fuel that powers a water heater, whether tank or tankless, will also affect the overall cost. Gas and electric are the most common power sources, but homeowners have a few other choices, depending on their needs.

• Gas: While a gas system will cost $100 to $200 more than an electric model upfront, most people end up saving more over the life of the unit on their utility bills because natural gas costs less than electricity, on average.
• Electric: Electric water heaters typically cost between $400 to $1,600, and they’re cheaper to install. They’re also more energy efficient than gas. But you may spend more on utility bills, so an electric water heater may be better for smaller homes.
• Propane: Propane is typically used in more rural areas that don’t have access to a gas line. However, these water heaters cost more upfront and come with added maintenance to refill the tank. Expect to pay $700 to $2,500 for propane.
• Solar: Solar water heaters are excellent for the environment — even better than electric. However, you’ll pay quite a bit upfront for installation, from $1,700 to $5,500.
• Hybrid: Heat pumps are also very environmentally friendly and energy efficient. But like solar water heaters, they are costly to install and may not be a good choice for larger homes. Hybrid systems will range from $1,200 to $3,500.

» MORE: How do solar water heaters work?

Size

The larger the water heater, the more expensive it is. For tank-based water heaters, you’ll need to determine how many gallons your household needs. If only one or two people live in your home, a 30-gallon tank will most likely be enough. However, for households of four to five, you’ll want a 40- to 50-gallon tank.

If your household uses fewer than 40 gallons a day, one tankless system should work, but if you use more, you may need two systems.

Venting system

If you have a gas or propane water heater, you need a venting system to remove combustion gasses from the air. With a direct vent system, the air is pushed outside the home through an exhaust pipe or chimney.

But if you’re in a home that doesn’t have access to a chimney, you’ll need a power vent system. It uses the assistance of a fan to push the air out through a horizontal pipe. A power vent will cost more than a direct vent.

» FINANCE A REPLACEMENT: Best personal loan companies

Additional cost factors

While most of a water heater’s cost is based on the type, size, and fuel source, there are a few other factors that can raise the price of the project.

Converting water heaters

Replacing an existing unit generally costs less than installing a system from scratch, since many of the electric and gas hookups are already set. But if you’re converting from one power source to another, there will be additional costs, such as adding electrical wiring ($550 to $2,300), installing gas lines ($275 to $825) or installing a water line ($350 to $1,900).

Efficiency rating

High-efficiency models come in both tank and tankless models and can offer energy savings of 100% to 300%. However, they cost an average of $1,000 to $3,000 more than a standard-efficiency model.

Location

If the water heater needs to be moved, there may also be costs to repair and install drywall ($1,000 to $2,900) or build new framing ($200 to $400).

Permits

You may need to pay for permitting ($100 to $1,500), depending on the extent of the work and the state you live in.

How much does a water heater installation cost?

The cost of installing your water heater depends on the type of water heater you buy, whether you’re switching to another energy type and what extra labor charges might be involved (e.g., drywalling, wiring).

A tank-based water heater is cheaper upfront to install, but a tankless system will save you money down the line.

“Replacing a water heater can be a fairly straightforward task, but the costs can vary greatly,” Richardon, the plumbing company owner, noted. “We have seen situations where the preexisting and plumbing infrastructure is not up to standard when installing a new water heater, so this may have to be upgraded also, which will inflate the final cost.”

Installation costs alone for a tanked gas or electric water heater range from $150 to $800; tankless water heater installation costs around $400 to $1,500. The best way to determine installation costs is to have a licensed plumber come to your house to evaluate your space and options. You save more money in upfront costs by installing a tank-based water heater, but a tankless system saves you more in the long run.

» PROTECT YOUR INVESTMENT: Is an appliance extended warranty worth it?

Signs you need a new water heater

Most water heaters last between eight and 12 years, though newer tankless systems can last over 20 years. However, there are a few key symptoms to watch out for that indicate your current water heater is on its last legs.

Most of these issues will require a licensed plumber to inspect your unit and offer a quote for repair or replacement:

• Rusty or metallic water: If you notice a rust color to your water or a metallic taste, this often indicates corrosion. This could mean you need a new water heater or need to replace the anode rod.
• Leaks: Leaks are usually a sign that the water heater needs to be replaced, as these often occur internally and are very difficult (or cost-prohibitive) to repair.
• Water not getting hot enough: If your water isn’t getting hot enough (or at all), first check that the pilot light is still lit. Next, make sure you haven’t tripped a breaker. If you’ve ruled these possibilities out, you should have the heater inspected by a professional, as there’s likely an issue with the internal heating mechanism.
• Pops and cracking sounds: These noises usually indicate that the heating element isn’t working properly. It should be inspected and potentially replaced by a licensed technician.
• An older model: If your water heater is over 10 years old, start budgeting for a new one to buy within the next year or two. Consider buying a new one even if your current one is running fine since a water heater this old is more likely to suddenly stop working without notice.

» MAINTAIN YOUR HOME: Annual home maintenance checklist

Bottom line

When your water heater goes out, it’s a pain — you can’t complete daily tasks like bathing, cooking, doing the dishes or laundry. By watching out for the signs of a failing water heater, you can better plan for replacing your unit before it stops working completely.

Take the time to research your options, including tank-based and tankless units, power sources, capacity, warranties and cost.