Quick answer
A tankless water heater is a water heater that warms water only while a hot tap is open, using a gas burner or electric elements and a heat exchanger instead of a storage tank.
Its size is set by flow, in gallons per minute at a given temperature rise, not by tank gallons. It never runs out the way a tank does, but it can only heat so much water at once.
Quick facts
The key facts about Tankless Water Heater, with sources:
- Also called
- On-demand, instantaneous or demand-type water heater 1
- Rated by
- Gallons per minute (GPM) of hot water, not tank volume 2
- Federal definition (gas)
- Under 200,000 Btu/h input and no more than 1 gallon of water per 4,000 Btu/h 1
- ENERGY STAR gas minimum
- UEF ≥ 0.95 and at least 2.8 GPM over a 67°F rise 1
- Typical gas burner size
- 120,000–200,000 Btu/h, versus 30,000–50,000 for a tank 3
- Needs power?
- Yes, even gas units need a 120-volt outlet for controls and ignition 3
Key takeaways
- A tankless water heater heats water as it passes through, so there is no tank of hot water waiting.
- Its limit is flow: how many gallons per minute it can heat by the number of degrees your cold water needs.
- Gas units have much bigger burners than tank heaters, so the gas line, vent and power outlet often change.
- Hard water builds scale inside the small heat exchanger, so many units need a yearly descaling flush.
- It suits homes with steady, moderate demand; it struggles with several big draws at once in a cold-water climate.
Tankless water heater meaning: heat on demand, no tank
A tankless water heater holds almost no water. ENERGY STAR defines an instantaneous, or tankless, unit as one that holds no more than one gallon of water for every 4,000 Btu per hour of burner input. For gas, the input must also be under 200,000 Btu per hour 1.
A standard storage tank water heater keeps 40 or 50 gallons hot all day, even while everyone is at work. A tankless unit keeps nothing hot: it sits idle until water moves, then fires and heats the water on its way to the tap.
That one change explains most of what follows. There is no stored hot water to lose heat overnight, which is where the energy savings come from. There is also no reserve to draw from, so the heater must keep up with every gallon in real time.
You will see the same machine sold as an on-demand, instantaneous or demand-type water heater. Whole-home units serve every tap in the house. Point-of-use units are small, often electric, and serve one sink or one bathroom.
How a tankless water heater heats water in five steps
A tankless unit heats water only while it flows: a sensor detects the draw, the burner or elements fire, and the heat stops when the tap closes. Each step is below.
- Flow is sensed: A flow sensor notices water moving through the unit and tells the control board to start 4.
- The burner or elements fire: A gas unit lights its burner with an electric spark, which is why it needs a power outlet 3. An electric unit switches on its heating elements.
- Water crosses the heat exchanger: Cold water passes through a coil of tubing that the flame or elements heat. The water leaves at the set temperature.
- Output is matched to flow: The control raises or lowers the heat to hold the set temperature as flow and incoming water temperature change 4.
- Flow stops, heat stops: When the tap closes, the burner shuts off. Nothing is kept hot until the next draw.
- Hot tap opensWater starts moving
- Flow sensor tripsNeeds the unit’s minimum flow
- Burner lightsSpark ignition on 120-volt power
- Heat exchangerWater rises to the set temperature
- Tap closesBurner stops; no stored heat
There is no tank in this chain, which is why there is no standby heat loss and no stored reserve. Source: [3] [4]
Most units also need a minimum flow before they fire. A 2009 DOE Building America fact sheet put that at about 0.5 GPM for typical models, which can be a problem with low-flow faucets 4. Newer models list their own minimum in the manual, so check the spec sheet.
Types of tankless water heaters: gas, condensing, electric and point-of-use
| Type | How it differs | What it means for an install |
|---|---|---|
| Gas, non-condensing | Exhaust leaves hot, about 300°F, and some heat is lost up the vent 3 | Needs a corrosion- and heat-resistant vent, such as Category III stainless steel 3 |
| Gas, condensing | A second heat exchanger pulls heat from the exhaust; efficiency over 90% 3 | Exhaust is about 100°F, so PVC vent pipe can often be used; acidic condensate must be drained 3 |
| Electric, whole-home | Elements heat the water; no flame or vent | Gas units generally have larger capacity than electric ones; electric whole-home units need a large electrical supply 4 |
| Point-of-use | A small unit at one sink or bathroom | Short pipe run to one fixture; serves a single area, not the whole house |
| Indoor vs outdoor | Outdoor units sit on an exterior wall | PNNL notes outdoor installs are usually limited to the warmest climate zones (1 and 2) 3 |
Example: sizing a tankless heater with real numbers
This is an illustration of the sizing method, not a recommendation for your home. It uses the PNNL Building America worked example and the ENERGY STAR fixture flows.
| Step | Figure | Source |
|---|---|---|
| Coldest incoming water (Seattle groundwater) | About 52°F | PNNL example 3 |
| Target outlet temperature | 120°F | PNNL example 3; CPSC scald guidance 6 |
| Required temperature rise | 120 − 52 = 68°F | PNNL example 3 |
| Practical peak flow for that home | 4.5 GPM | PNNL example 3 |
| Unit must deliver | At least 4.5 GPM at a 68°F rise | Read from the maker’s flow-vs-rise chart 3 |
| For comparison: shower + dishwasher | 2.5 + 1.3 = 3.8 GPM | ENERGY STAR average fixture flows 2 |
Temperature rise = Set temperature − Coldest incoming water temperature
Set temperature- Usually about 120°F at the tap
Incoming water temperature- Groundwater or main temperature in the coldest month
Peak flow- Gallons per minute of all hot draws that run at the same time
Pick a unit whose published flow at your temperature rise is at least your peak flow 3.
Source: [3]
The lesson is that the same heater delivers fewer gallons per minute when the incoming water is colder. A unit that keeps up in July can fall short in January, so size for the coldest water of the year. Our water heater sizing tool walks through the same two numbers.
What to look for on a tankless quote, spec sheet and label
The three numbers that matter on paper are the maximum GPM, the flow at your temperature rise, and the UEF. On a quote, look for the model number, the fuel, and the maximum GPM.
A good quote also lists the gas line size, the vent material and route, a new power outlet if needed, a condensate drain for condensing units, and isolation valves for future flushing.
ENERGY STAR tells buyers to have the installer confirm the GPM size, the gas line, power for the fan and the venting before work starts 2.
On the spec sheet, the key line is a chart of flow against temperature rise. That chart, not the headline GPM, tells you what the unit does with your water.
On the yellow federal label and ENERGY STAR listing, you will see a Uniform Energy Factor (UEF).
For a tankless unit, the federal test assigns a draw pattern based on its maximum GPM rating, while a tank is placed by its first-hour rating 5.
Our page on the first-hour rating explains the tank side of that test.
Tankless benefits, and what the house has to supply
What it does well
- No standby loss, because no stored water sits cooling between uses 4.
- High efficiency in condensing gas models: ENERGY STAR gas units must reach a UEF of 0.95 or more 1.
- Longer expected life: DOE guidance puts tankless units at up to about 20 years, against 10–15 for tanks 34.
- Small, wall-hung body that frees floor space.
- Hot water does not run out during a long shower, as long as flow stays within the unit’s rating.
What it asks of the house
- A large gas burner, often near 200,000 Btu/h, which may need a bigger gas line 3.
- Needs a vent route and a 120-volt outlet, so it stops during a power cut 34.
- Scale from hard water can cut output and cause failure without regular flushing 3.
- Does not deliver hot water faster; it can add a few seconds while it fires 4.
- Higher upfront cost than a like-for-like tank swap 3.
Limitations: flow, cold water and the “cold-water sandwich”
Flow is the hard limit. Picture a winter morning: two showers (2.5 GPM each by ENERGY STAR averages) plus a clothes washer (3.3 GPM) ask for about 8.3 GPM at once 2.
A unit rated for less at that day’s temperature rise splits its heat across all three, and everyone gets warm water instead of hot. Some homes solve this with two units.
Very low flows are the other edge. Below the minimum activation flow, the burner will not light. A hand sink with a trickle of hot water may never get warm 4.
A short burst of cold water can also arrive between two hot draws. PNNL calls this the cold-water sandwich and notes a small 5- or 10-gallon electric tank is a common fix 3. Recirculation systems can help with wait times, and our page on the hot water recirculation pump covers how they work.
What drives the cost of a tankless water heater
We do not publish tankless prices on this page. A fair figure needs many dated local quotes, and the install work varies far more than the unit price. PNNL’s guide puts installed cost at about 1.5 to 2 times that of a tank heater, which shows why the install items matter 3.
The biggest drivers are the gas line (PNNL says most gas units need at least a 3/4-inch line, where tanks typically use 1/2-inch), new venting, a power outlet, a condensate drain, moving the unit to a new spot, and permit fees 3. Switching from electric to gas, or the reverse, adds the most work.
Lifespan and warranty belong in the math too. ENERGY STAR gas tankless units carry a warranty of at least 6 years on the heat exchanger and 5 years on parts 1.
Our tank vs tankless calculator compares the two over time with your own numbers, and the plumbing cost guide explains how quotes are built.
How a tankless installation usually goes
A whole-home gas install touches gas, venting, power and water, so it is licensed work in most places.
- Load and size check: The installer lists the hot draws that run at the same time and the coldest incoming water temperature 3.
- Gas and power survey: They check the meter and gas line size, and find a spot with a 120-volt outlet or plan one 23.
- Permit: Most jurisdictions require a permit for a water heater replacement or fuel change. ENERGY STAR advises choosing an installer who can pull permits and knows local codes 2.
- Vent and condensate: The vent is run to the outside with the clearances the maker and code require, and condensing units get a condensate drain, often with a neutralizer 3.
- Water connections: Isolation (service) valves are added so the heat exchanger can be flushed later 3.
- Start-up and inspection: The unit is set, often to about 120°F, tested, and inspected.
Gas and venting are not DIY work
A tankless gas unit burns up to about 200,000 Btu per hour, and a poor vent or gas joint can leak carbon monoxide or gas. Leave gas, venting and combustion work to a licensed pro.
If you smell gas, leave the home and call your gas utility or 911 from outside. Keep the outlet temperature near 120°F: CPSC says 140°F water can cause a third-degree burn in about 6 seconds 6.
Maintenance: descaling and filters
Scale is the main enemy of a tankless heat exchanger. These are the tasks most makers list:
- Flush or descale the heat exchanger on the schedule in your manual. PNNL notes many makers recommend a yearly professional cleaning with a mild acid such as vinegar 3.
- Clean the cold-water inlet screen, which catches grit before it reaches the heat exchanger.
- Keep the air intake and vent terminal clear of leaves, snow and nests.
- Check the condensate line and neutralizer on condensing units, since the neutralizer must be maintained 3.
- Watch for error codes on the display and look them up in the manual rather than resetting over and over.
Ask for the flush valves at install
PNNL recommends fitting isolation valves with service ports when the unit goes in. Without them, every future descaling job takes longer 3.
If your water is hard, the schedule gets shorter. A water softener upstream reduces the scale load, and our water hardness tool helps you read your utility report.
Warning signs and when to call a plumber
- Water swings between hot and cold during one shower, which can mean flow is above the unit’s rating or scale is building.
- Hot water fades when a second fixture opens.
- The unit shows a recurring error code or will not light.
- Water drips from the unit, the pressure relief valve or the vent.
- Soot, scorch marks or a sharp smell near the unit or vent. Shut it off and call a pro, and get out if a CO alarm sounds.
For a no-hot-water problem, our water heater repair and replacement service covers what a visit includes, and the repair or replace tool helps with the next step.
Federal test, ENERGY STAR and code rules for tankless heaters
Federal efficiency test: The U.S. Department of Energy test procedure is 10 CFR Part 430, Subpart B, Appendix E. It rates water heaters by Uniform Energy Factor and assigns a tankless unit to a draw pattern by its maximum GPM rating: under 1.7 GPM is very small, 1.7 to under 2.8 is low, 2.8 to under 4 is medium, and 4 GPM and up is high usage 5.
We read the 2022 printed edition.
ENERGY STAR: A certified gas tankless unit must have a UEF of at least 0.95, deliver at least 2.8 GPM over a 67°F rise, and carry warranties of at least 6 years on the heat exchanger and 5 on parts (criteria page checked 2026-10-12) 1.
Codes: Installation falls under the plumbing and fuel gas codes your jurisdiction has adopted, such as the International Residential Code, the International Plumbing Code or the Uniform Plumbing Code, plus NFPA 54 for gas piping, which PNNL cites for gas pipe sizing 3.
Adoption and amendments vary by state and city, so check with your local building department.
Temperature: CPSC urges setting water heaters to 120°F to cut scald risk 6. CDC advises keeping circulating hot water at or above 120°F to limit Legionella growth, and notes point-of-use mixing valves can serve both goals 7.
Tankless vs other water heater types
| Type | How it stores heat | Sized by | Main trade-off |
|---|---|---|---|
| Tankless | No storage; heats on demand 1 | GPM at a temperature rise 2 | Flow limit and bigger gas, vent and power needs 3 |
| Storage tank | Keeps a tank of water hot | Tank size and first-hour rating 5 | Standby heat loss; shorter life of 10–15 years 3 |
| Heat pump water heater | Tank heated by a heat pump that moves heat from the air | Tank size and first-hour rating 5 | Needs room air and space around it; see that page |
| Point-of-use tankless | No storage; one fixture | GPM for that fixture | Serves one area only |
The right answer depends on your peak flow, fuel and climate more than on the label. The calculator linked in the cost section above is built for exactly this choice.
Common tankless myths
- Myth Tankless means instant hot water at the tap.
- Reality The heater fires fast, but the water still has to travel the pipe. A 2009 DOE fact sheet notes it may add 5–15 seconds while the unit senses flow and lights 4.
- Myth A bigger number on the box is all that matters.
- Reality Output depends on temperature rise. The same unit gives fewer GPM when incoming water is cold 3.
- Myth Tankless heaters need no maintenance.
- Reality Scale builds in the heat exchanger in hard water; many makers call for yearly descaling 3.
How climate and water change the picture
Two regional facts move tankless sizing more than anything else. The first is incoming water temperature: PNNL’s example uses Seattle groundwater at about 52°F, which forces a 68°F rise to reach 120°F; colder northern supplies need a bigger rise and so give fewer gallons per minute from the same unit 3.
The second is water hardness, which drives how fast scale builds in the heat exchanger.
Climate also limits where the unit can go: PNNL notes outdoor installs are usually limited to climate zones 1 and 2, and outdoor units in colder places need freeze protection 3.
When a tankless heater makes sense, and what to do next
A tankless heater makes sense when your peak hot-water flow is modest, your gas line and vent route are workable, and you plan to stay long enough for the longer life to pay back the extra install work.
It fits less well in a large home with many fixtures running at once, in very cold water, or where the gas line would need a long new run.
Before you call, write down the fixtures that run at the same time, your fuel, and where the current heater sits. Then get written quotes that name the max GPM at your temperature rise, the vent, the gas line and the permit.
The guide below matches three common situations to a next step.
- If Two showers at once in a cold-water region
- Then Check the flow-vs-rise chart closely or plan for two units
- If Hard water
- Then Plan on yearly descaling or add a softener
- If One far-away sink waits too long for hot water
- Then A point-of-use unit may solve it
Questions about Tankless Water Heater
What are the disadvantages of a tankless water heater?
The main drawbacks are a flow limit, a higher installed cost and more install work.
PNNL puts installed cost at 1.5 to 2 times a tank heater, and most gas units need a 3/4-inch gas line, new venting and a 120-volt outlet.
They stop in a power cut, need descaling in hard water, and can give a brief burst of cold water between draws.
What size tankless water heater do I need?
Size it by two numbers: peak flow and temperature rise. Add up the gallons per minute of the hot fixtures that run at the same time, then subtract your coldest incoming water temperature from about 120°F. Pick a unit whose published flow at that rise meets your peak flow.
PNNL’s Seattle example needed 4.5 GPM at a 68°F rise.
Do tankless water heaters run out of hot water?
Not in the way a tank does, because there is no stored supply to use up. The limit is flow. If you open more hot taps than the unit can heat at once, the water gets cooler instead of running out. Sizing for your real peak flow, or adding a second unit, prevents that.
How long does a tankless water heater last?
DOE-backed guidance from PNNL and Building America puts tankless units at up to about 20 years, compared with 10 to 15 years for a storage tank.
Real life depends on water hardness and maintenance, since scale in the heat exchanger is a common cause of failure. ENERGY STAR gas models carry at least a 6-year heat exchanger warranty.
Does a tankless water heater work during a power outage?
Usually not. Even gas tankless units need a 120-volt outlet to run the controls, sensors, fan and spark ignition, so most stop when the power goes out. A standard gas tank heater with a standing pilot may keep working. If outages are common where you live, ask about backup power for the unit.
How often should a tankless water heater be flushed?
Follow the schedule in your owner’s manual. PNNL notes that many makers recommend a yearly professional cleaning of the heat exchanger with a mild acid such as vinegar, and more often in hard water. Isolation valves fitted at install make this a short job. Skipping it lets scale cut output and can lead to failure.
Why does my tankless heater give a burst of cold water?
That is often the “cold-water sandwich.” When you turn hot water off and back on, water that cooled in the pipe and the unit can arrive before freshly heated water. PNNL notes this can happen with on-demand recirculation, and that a small 5- or 10-gallon electric tank after the unit is a common fix.
Is a tankless water heater more efficient than a tank?
Usually, because it has no standby loss. ENERGY STAR gas tankless units must reach a Uniform Energy Factor of 0.95, and PNNL reports gas tankless energy factors well above gas tanks.
How much you save depends on how much hot water you use, so compare the UEF and your own bills rather than a headline percentage.
Do I need a bigger gas line for a tankless water heater?
Often, yes. PNNL says most tankless gas units need at least a 3/4-inch gas line where a tank typically uses 1/2-inch, because the burner can be near 200,000 Btu per hour versus about 40,000 for a typical tank. A licensed installer sizes the gas pipe to the fuel gas code your area has adopted.
What temperature should a tankless water heater be set to?
Most homes set it near 120°F. CPSC urges 120°F to cut scald risk and warns 140°F water can cause a third-degree burn in about 6 seconds. CDC says circulating hot water should stay at or above 120°F to limit Legionella. Mixing valves at the fixture can help where higher settings are needed.
Sources
- ENERGY STAR, Residential Water Heaters Key Product Criteria, retrieved .
- ENERGY STAR, Whole Home Tankless Gas Water Heaters, retrieved .
- PNNL Building America Solution Center, Gas-Fired Tankless Water Heaters, retrieved .
- U.S. DOE Building America (CARB), Tankless Water Heaters fact sheet (2009), retrieved .
- 10 CFR Part 430, Subpart B, Appendix E, Uniform Test Method for Water Heaters (2022 edition, govinfo), retrieved .
- U.S. CPSC, Avoiding Tap Water Scalds (Publication 5098), retrieved .
- U.S. CDC, Monitoring Building Water (Legionella control), retrieved .
Expert review
Written by the HyrePlumber Research team. Not yet reviewed by an outside expert. We say so rather than imply a review that has not happened; see our editorial policy.
How the numbers were checked: The definition and ENERGY STAR criteria come from the ENERGY STAR key product criteria page.
Sizing, venting, gas line, life and maintenance facts come from the PNNL Building America Solution Center guide and a 2009 DOE Building America fact sheet, each attributed.
Draw-pattern bins are from the 2022 printed edition of 10 CFR 430 Appendix E. Scald and Legionella temperatures are from CPSC and CDC.
The DOE Energy Saver savings percentages often quoted elsewhere were not reachable at source and are not used. No prices are given.
Suggest a correction. We fix errors and say what changed.