How much does it cost to replace a water heater?

A new water heater for your home typically costs between $800 and $1,600, depending on the type of device you get. Residential-size tank-based systems average around $1,200, while tankless water heaters can range widely in cost — typically from about $600 for a small-scale unit to $2,400 for higher-end models.

Labor and installation costs are included in these prices, representing anywhere from $150 to $800 of the total cost. Keep in mind that installation may be more expensive for some models, however.

Key insights

• There are few different types of water heaters — tank versus tankless and electric versus gas, for instance.
• If your water heater is more than a decade old, it’s probably time to start saving for the cost of a replacement.
• A home warranty can help you save money on water heater replacement (as long as your contract covers this system).

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. They can gradually lose performance or suddenly stop working and need immediate replacement. However, there are a few key symptoms to watch out for ahead of time that indicate your current water heater is on its last legs.

Most of these issues will require a licensed plumbing company to inspect your unit and offer a quote for repair or replacement — though some you may be able to fix yourself.

• Rusty or metallic water: If you notice a rust color to your water or a metallic taste, this is often an indication of corrosion. This could mean you need a new water heater or that you need to replace the anode rod.
• Leakage: Leaks are an almost sure sign your 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 not getting hot at all), you should first check that the pilot light is still lit or that 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: This is usually an indication that the heating element isn’t working properly and should be inspected and potentially replaced by a licensed technician.
• An older model: If your water heater is over 10 years old, you should start budgeting for a new one to buy within the next year or two. You may also consider buying a new one even if your old one is running fine, considering a water heater this old is more likely to suddenly stop working without notice.

How much does it cost to replace a water heater?

Water heaters are less expensive to replace than some other systems, like HVAC systems, but 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.

The cost of a standard tank-storage water heater unit averages $400 to $1,600, and installation costs range from $150 to $800. Tankless units tend to cost between $250 and $2,500, with installation costs between $400 and $1,500. There are also high-efficiency and solar options that run significantly higher — upward of $3,000.

» MORE: How do solar water heaters work?

Those with a home warranty can significantly reduce the costs of water heater replacement. Home warranty contracts protect homeowners against the cost of repairing or replacing major home appliances and systems — so if your water heater breaks and is covered, your warranty provider sends a licensed technician to assess any system failure.

One Choice Home Warranty reviewer on our site was covered by their warranty: “After a one-week vacation, I returned to find my hot water heater was leaking. I call a friend to see if he could help, then I remembered I had Choice Home Warranty. ... I submitted a claim and that day Choice started working my claim. The next day everything was set up and the claim was approved. I am awaiting delivery of my new water heater.”

In this case, you pay a service call fee (often between $75 and $150), and any repair or replacement is done at no further cost to you. A home warranty typically costs about $40 to $60 per month.

» MORE: Best Home Warranty Companies

How much does it cost to replace an electric water heater?

Electric water heaters typically cost between $400 to $1,600; you can expect to pay $100 to $200 more for gas 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.

However, 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).

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). You may also 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 it cost to replace a tankless water heater?

The cost to install a tankless water heater is higher than the cost for 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.

Licensed plumbers will charge anything 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 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.”

Factors involved in water heater replacement costs

When budgeting to replace your water heater, keep the following factors in mind:

• Type: The biggest factor in your water heater replacement costs will be whether you choose a tankless or tank-based system. Tankless systems heat water on demand and can last twice as long as tank systems, but they cost two to three times as much. 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 they take one to two hours to replenish when the hot water runs out.
• 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.
• 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.
• Gas versus electric: 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.

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).

“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.

Bottom line

When your water heater goes out, it’s a pain — you can’t complete daily tasks like bathing, cooking or 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.