A tank water heater keeps a reservoir of water hot at all times, so it can supply several faucets at once but loses some heat while it sits. A tankless water heater heats water only as it flows through, so it avoids that standby loss and can run as long as you need, but only at a limited flow rate. According to the U.S. Department of Energy, tankless models cost more upfront, can be 8% to 34% more efficient, and last about 20 years versus 10 to 15 for a tank.
Neither is best for every home. The right choice depends on how much hot water you use at once, what fuel you have, and how much you want to spend upfront.
How a tank water heater works
A storage tank holds a set volume of water and keeps it at the thermostat setting. When you open a hot tap, hot water leaves from the top and cold water enters at the bottom to be heated. Because the tank sits full of hot water around the clock, it loses some heat to the surrounding air, called standby heat loss, and has to reheat periodically even when no one is using water. See how a water heater works for the full tour.
How a tankless water heater works
A tankless (also called on-demand or instantaneous) heater has no storage. When a hot tap opens, the flow of water switches on a gas burner or electric elements, and the water is heated as it passes through a heat exchanger. When the tap closes, the heater shuts off. There’s no tank to keep hot, so there’s no standby loss.
The key differences
Hot water supply
A tank can run out: once the stored hot water is used, you wait for it to reheat. A tankless heater doesn’t run out, but it can only heat so much water at a time. The Department of Energy puts typical output at about 2 to 5 gallons per minute. Run a shower, the dishwasher and the washing machine together and a single unit may not keep up. Larger homes sometimes install more than one.
Energy use
Skipping standby loss is where tankless heaters save energy. The Department of Energy estimates they can be 8% to 34% more efficient than storage heaters, with the bigger savings in homes that use less hot water. It also notes an ENERGY STAR qualified tankless model could save $100 or more a year.
Cost and installation
Tank heaters cost less to buy and are usually a straight swap. Tankless units cost more, and switching can mean new venting, a larger gas line or a heavier electrical circuit, which adds to the installed price. Whole-house electric tankless units in particular can need a lot of electrical capacity.
Lifespan and maintenance
Tank heaters typically last 10 to 15 years; tankless about 20. Tanks benefit from flushing and anode rod checks. Tankless units need periodic descaling, especially with hard water, and their inlet filters cleaned. More on lifespan in how long water heaters last.
Which fits your home?
| A tank may suit you if… | A tankless may suit you if… |
|---|---|
| You often run several hot taps at once | You use hot water in one or two places at a time |
| You want the lowest upfront cost | You’re willing to pay more now to save energy later |
| Your existing venting, gas line and wiring suit a tank | You need to save floor space |
| You’re replacing a failed tank in a hurry | You’d like a longer-lasting unit |
Heat pump water heaters are a third option worth comparing if you have an electric tank: they’re storage tanks that move heat from the surrounding air instead of generating it, similar to how a heat pump works.
What you can do yourself vs. when to call a pro
| Safe for most homeowners | Call a licensed plumber or electrician |
|---|---|
| Count how many hot taps you use at the same time | Sizing a tankless unit for your flow and climate |
| Check the rating plate for your current tank’s age and fuel | Gas line, venting or electrical upgrades |
| Compare ENERGY STAR models | Installation and any required permits |
Safety first. Gas water heaters, tank or tankless, must be vented correctly to carry carbon monoxide outside. Improper venting or an undersized gas line can be dangerous. Installation should be done by a licensed professional, and every home with gas appliances should have working carbon monoxide alarms.
Frequently asked questions
Does a tankless water heater give instant hot water?
Not at the faucet. The water still has to travel through the pipes from the heater, so you wait about as long as with a tank. “Instantaneous” refers to heating without storage.
Will a tankless heater work in a cold climate?
Yes, but colder incoming water means the heater has to raise the temperature more, which lowers its flow rate. Sizing should account for your winter water temperature.
Is it worth replacing a working tank with a tankless?
Usually the decision makes the most sense when the old tank is near the end of its life. Replacing a healthy tank early means paying the higher upfront cost before you need to.
Sources
- U.S. Department of Energy, Which Water Heater Is Right for You?
- U.S. Department of Energy, Tankless or Demand-Type Water Heaters