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Tank vs tankless payback

Type the installed price of each option from your bids and the yearly energy cost of each from your bills or the proposal.

4 patterns in the federal water heater test US Government Publishing Office, Code of Federal Regulations, 10 CFR 430 subpart B appendix E, retrieved September 5, 2026. Each heater’s UEF is measured on one of four draw patterns; compare two UEFs only on the same one.

Simple payback = the extra cost to install tankless ÷ the energy it saves each year. With example bids of $1,800 and $3,500 and energy of $320 and $220 a year, that is $1,700 ÷ $100 = 17 years. If tankless saves no energy on your figures, it never pays back.

Work out the payback

Arithmetic on your figures. Nothing is stored or emailed.

From the tank bid, all lines included.

Include venting, gas line and treatment if they are on the bid.

From your bills or the EnergyGuide label.

From the proposal or its EnergyGuide label.

— Simple payback
— Installed cost difference
— Energy cost difference

What this assumed —

A check on two bids, not a quote. Maintenance and equipment life are not in the arithmetic.

Worked examples

Two quotes, run through the calculator

Tankless saves energy

Tank bid $1,800, tankless bid $3,500: $1,700 more. Energy $320 a year for the tank, $220 for tankless: $100 saved. $1,700 ÷ $100 = 17 years.

Tankless does not save

Same bids, but the tankless proposal shows $330 a year of energy. It costs more to install and more to run: no payback on these figures.

Simple payback = (tankless installed − tank installed) ÷ (tank energy a year − tankless energy a year). All four figures are examples; type your bids and bills.

Tankless is sized in gallons per minute at a temperature rise

A tank runs out of hot water. A tankless heater does not run out, but it can fail to keep up when too many fixtures run at once.

Temperature rise. It is the delivered temperature minus the incoming water temperature. A unit’s flow rating falls as the rise grows, so the same heater delivers less in a cold-water winter than in summer.

The question to answer. What is the most hot water your household draws at once, and what rise does it need in the coldest month? Ask each bid for a gpm at a stated rise.

The fixture figures. EPA WaterSense puts the federal showerhead maximum at 2.5 gpm and the WaterSense label at 2.0. Bathroom faucets are 2.2 and 1.5 gpm. Add up what runs at once.

The efficiency label depends on the test day

The federal test assigns each heater a draw pattern from its own first-hour rating or maximum gpm. Two UEF numbers compare fairly only on the same pattern.

Draw patternFirst-hour ratingMaximum gpmGallons per test dayDraws
Very-Small-Usage0 to under 18 gal0 to under 1.7 GPM109, largest 2 gal
Low-Usage18 to under 51 gal1.7 to under 2.8 GPM3811, largest 15 gal
Medium-Usage51 to under 75 gal2.8 to under 4 GPM5512, largest 15 gal
High-Usage75 gal and above4 GPM and above8414, largest 27 gal

US Government Publishing Office, Code of Federal Regulations, 10 CFR part 430, subpart B, appendix E (2022 edition), retrieved September 5, 2026. The pattern is printed on the label next to the UEF.

The savings percentage we will not print

The claim you will see elsewhere. That demand (tankless) water heaters are "24% to 34% more energy efficient" than storage heaters for homes using 41 gallons a day or less, and 8% to 14% more efficient at around 86 gallons a day.

Why it is not here. On September 5, 2026, every Energy Saver page it is attributed to returned an error, so we could not read it at the source.

What to use instead. The energy figures from your own bills and the proposal. They already include your fuel price, climate and habits.

Where the installed-cost gap comes from

Ask each bid to list these lines. HyrePlumber publishes no prices for them.

Venting

A condensing unit needs its own sealed vent and a condensate drain. Removing a tank from a shared chimney can change the draft for the appliance left on it: a safety check for the installer.

Gas supply

A gas tankless unit fires at a higher input than the tank it replaces. Ask whether the gas line or meter needs upsizing.

Electrical

A gas unit needs an outlet. A whole-house electric unit can need a larger electrical service: ask for an electrician’s load check.

Scale

Hard water scales the heat exchanger. Ask whether treatment or a descaling valve kit is included, and whether the warranty requires it.

Recirculation

Instant hot water at the tap comes from a recirculation loop, not the heater. Ask whether one is in the price and how it is controlled.

Permit

Water heater replacement is permitted work in many places. Ask who pulls the permit.

Scalding and Legionella pull the setting in opposite directions

Two federal agencies protect against two different harms. A mixing valve resolves them.

CPSC, on scalds. “Most adults will suffer third-degree burns if exposed to 150 degree water for two seconds. Burns will also occur with a six-second exposure to 140 degree water or with a thirty second exposure to 130 degree water. Even if the temperature is 120 degrees, a five minute exposure could result in third-degree burns.”

CPSC’s setting. “The U.S. Consumer Product Safety Commission (CPSC) urges all users to lower their water heaters to 120 degrees Fahrenheit.”

CDC, on Legionella. “Legionella grows best between 77°F–113°F (25°C–45°C).” CDC advises storing hot water above 140°F and keeping circulating hot water at or above 120°F.

The resolution CDC names. “Engineering controls that mix hot and cold water together at or near the point of use can both: Reduce the risk of scalding [and] Allow water in pipes to remain hot enough to limit Legionella growth.” That is a thermostatic mixing valve: store hot, deliver tempered. It is a plumber’s job.

What a tankless bid should state before you compare it

  • A gpm at a stated temperature rise

    For your incoming water in winter.

  • The simultaneous draw it was sized for

    Which fixtures, running at once.

  • Venting, condensate and gas line, itemized

    So the installed-cost gap is visible.

  • Water treatment and the warranty terms

    Whether descaling is required to keep the warranty.

  • A mixing valve and the delivered temperature

    Stored and delivered temperatures, in writing.

  • Permit and inspection

    Who pulls it and when the inspector comes.

What simple payback leaves out

Equipment life and maintenance. Descaling, anode changes and replacement dates are not in the sum. Ask each maker for the service schedule.

Fuel price changes. The calculator assumes this year’s energy cost every year.

Comfort. Endless hot water or a tank that runs out is not a dollar figure. Weigh it yourself.

Questions this calculator answers

Does a tankless water heater pay for itself?
Only if it saves energy and the saving covers the extra installed cost in a time you accept. Divide the extra cost by the yearly saving from your own bids and bills.
Why are there no default prices?
HyrePlumber holds no dataset of water heater bids or energy bills. Fuel price, climate, incoming water temperature and habits all move the numbers, so the boxes start at 0.
Where do I find the yearly energy cost?
For the tank you have, the yellow EnergyGuide label estimates a yearly cost, and your bills show the real one. For the tankless option, ask the installer to write an estimate on the proposal.
Can I compare two UEF numbers?
Only on the same draw pattern. The federal test assigns each heater one of four patterns from its own rating, so two UEFs can come from different test days.
How is a tankless heater sized?
By gallons per minute at a temperature rise. Add up the fixtures that run at once: a WaterSense shower is 2.0 gpm or less. Ask each bid for a gpm at your winter rise.
What makes tankless cost more to install?
Venting, a larger gas line or meter, an electrical upgrade for electric units and water treatment can all add to it. Ask each bid to list these lines.
What temperature should a water heater be set to?
CPSC urges 120°F to prevent scalds; CDC advises storing hot water above 140°F against Legionella. A thermostatic mixing valve lets you store hot and deliver tempered water.

Sources and methodology

Figures dated September 5, 2026. Last reviewed .

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