The big decision: tank Vs. tankless gas water heater

Tankless gas water heaters offer the following advantages over traditional tank-style water heaters:

-Ability to provide endless hot water on demand
-Higher energy efficiency
-Lower operating costs
-Space savings

Note: Typically (but not always), condensing tankless gas water heaters have two heat exchangers, and non-condensing models only have one.
The extra heat exchanger in condensing tankless gas water heaters uses heat from the exhaust gas to preheat the inflowing cold water. This means condensing tankless gas water heaters are more energy efficient, and have cooler exhaust gas to vent.
Source: Navien – 

Also, Condensing tankless gas water heaters require  proper disposition of acidic condensate.

Tankless gas water heater

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tankless gas water heater cost at retail - the big picture

Non Condensing Tankless Gas Indoor or Outdoor
Natural gas or Propane gas: 120,000 to 199,000 BTUs ~$600 to $1,200 (before any available local Utility market incentives).
Natural gas Operating cost ~$240/year
Propane gas Operating cost ~$500/year
Condensing Tankless Gas Indoor or Outdoor
Natural gas or Propane gas: 130,000 to 199,000 BTUs ~$1,150 to $2,750.
Local Utility rebates on ENERGY STAR® certified models up to $1,500
30% Federal tax credit up to $600 on product + professional installation net of local Utility rebates. The eligible tankless gas models are ENERGY STAR® certified model with a Universal Energy Factor [UEF] >= 0.95. ***Upgrade this year as the Federal tax credit is now set to expire on December 31, 2025
Natural gas Operating cost ~$220/year
Propane gas Operating cost ~$450/year
Note: Sizing of tankless gas water heaters….scroll to a video explanation at the bottom of this page under “Resources”

Product Comparison Table. 199K BTUs condensing tankless Gas water heaters with recirculation pump sold at The Home Depot and Lowe's

-*Retail prices may vary. Prices observed on 8/5/2025 (Louisville, KY)

Note: These models are Ultra Low Nox and can be installed in the entire US. They have a Universal Energy Factor [UEF] >=0.95 and are eligible for the 30% Federal tax credit up to $600.

For reference:
-A water heater’s energy efficiency is determined by the uniform energy factor (UEF), which is based on how much energy the water heater uses and how much energy is used to power the water heater itself.  The higher the uniform energy factor, the more efficient the water heater.
Source: DOE – Energy.gov

Our Selection. Buy with confidence. Great offers on 199K BTUs condensing tankless Gas water heaters with recirculation pump


-Indoor installation. Converts to Outdoor with vent cap.
-Natural gas only (see next product below for Liquid Propane).
-Free shipping to your home. Power Equipment Direct (PED) is a wholly-owned subsidiary of Ferguson Enterprises. Shop with confidence with the “eBay Money Back Guarantee” provision.
-Product specifications. See the comparison table above, column 5. Offered $267 cheaper than the same product at Lowe’s.
-ENERGY STAR® certified with a UEF>= 0.95. Qualifies for the 30% Federal tax credit until December 31, 2025
-30 days returns minus return shipping costs.

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-Indoor installation. Converts to Outdoor with vent cap.
-Liquid Propane only (see next product above for Natural gas).
-Free shipping to your home. Power Equipment Direct (PED) is a wholly-owned subsidiary of Ferguson Enterprises. Shop with confidence with the “eBay Money Back Guarantee” provision.
-Product specifications. See the comparison table above, column 6. Offered $162 cheaper than the same product at Lowe’s.
-ENERGY STAR® certified with a UEF>= 0.95. Qualifies for the 30% Federal tax credit until December 31, 2025
-30 days returns minus return shipping costs.

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-Lasts 3x Longer!—with X3® Scale Prevention Technology provides protection for the heat exchanger.
-Indoor installation. Converts to Outdoor with kit sold separately.
-Natural gas. Field convertible to Liquid Propane.
-Free shipping to your home. Sold by Build with Ferguson’s eBay store (BuildStore). Shop with confidence with the “eBay Money Back Guarantee” provision.
-Product specifications. See the comparison table above, column 7. Same product as the A. O. smith GT15THR-199X3 sold by Lowe’s. Offered $293 cheaper than the same product at Lowe’s.
-ENERGY STAR® certified with a UEF>= 0.95. Qualifies for the 30% Federal tax credit until December 31, 2025
-30 days returns minus return shipping costs.

Click for details on the 30% Federal tax credit up to $600 on product + professional installation net of local Utility rebates. Look for an ENERGY STAR® certified model with the UEF specifications detailed in the “Resources” section below. ***Upgrade this year as the Federal tax credit is now set to expire on December 31, 2025!
Note: Sizing of tankless gas water heaters….scroll to a video explanation at the bottom of this page under “Resources”
Gas water heaters must be installed by a licensed plumbing professional. We recommend that you request minimum 3 plumber quotes for the cost of the installation. 
Resource: LocalPlumbingQuotes by ImproveNet® powered by Angi®
Plumbing Professional

Natural or Propane gas tank or tankless water heater cost including Professional installation - The big picture

Standard Gas Water Heater
~$2,000 to $3,000 product + installation by licensed plumber 
Local Utility rebates on ENERGY STAR® certified models up to $700
Federal tax credit up to $600 on product + professional installation net of local Utility rebates. Ask for an ENERGY STAR® certified model.
Natural gas operating cost ~$300/year
Propane gas operating cost ~$500/year
Tankless Gas Water Heater
~$4,000 to $7,000 product + installation by licensed plumber 
Local Utility rebates on ENERGY STAR® certified models up to $1,500
30% Federal tax credit up to $600 on product + professional installation net of local Utility rebates. Ask for an ENERGY STAR® certified model with a Universal Energy Factor [UEF] >= 0.95
Natural gas operating cost ~$240/year
Propane gas operating cost ~$500/year
Gas tank water heater lifestyle image

Gas tank water heater cost at retail - The big picture

What size of gas tank do I need?

  • Family of 1 to 2: 30 gallons
  • Family of 2 to 4: 40 gallons
  • Family of 5 or More: 50 gallons

Source: https://www.lowes.com/n/buying-guide/water-heater-buying-guide

Standard Atmospheric Vent 

Most common. Exhaust gasses vented vertically to exit the home.

Natural gas: ~$500 to $1,300.
Propane gas: ~$700 to $1,300.
Natural gas Operating cost ~$300/year
Propane gas Operating cost ~$500/year
Power Vent 

An electric blower pushes the exhaust gasses vertically or horizontally. Lower exhaust temperatures allow for PVC piping.

~$1,100 to $1,500.
Natural Gas Operating cost ~$300/year
Propane Gas Operating cost ~$600/year
Direct Vent 

Draws air for combustion outside the home rather than inside. Exhaust gasses vented back outdoors.

~$900 to $1,200.
Natural Gas Operating cost ~$250/year
Power Direct Vent 

An electric blower draws air for combustion outside the home rather than inside. Exhaust gasses vented back outdoors. PVC piping allowed.

~$1,100 to $1,600.
Natural Gas Operating cost ~$250/year

Source – A. O. Smith: https://www.hotwater.com/info-center/water-heater-venting.html

Click for details on Federal tax credit up to $600 on product + professional installation net of local Utility rebates. Look for an ENERGY STAR® certified model with the Universal Energy Factor [UEF] specifications detailed in the “Resources” section below
. ***Upgrade this year as the Federal tax credit is now set to expire on December 31, 2025!
Gas water heaters must be installed by a licensed plumbing professional. We recommend that you request minimum 3 plumber quotes for the cost of the installation. 
Resource: LocalPlumbingQuotes by ImproveNet® powered by Angi®

Resources: Basic principles to properly size a tankless gas water heater

Resources: Federal tax credit for ENERGY STAR® certified gas water heaters

Federal tax credits for ENERGY STAR® certified Gas Water Heaters:

https://www.energystar.gov/about/federal-tax-credits/water-heaters-natural-gas-oil-propane-tax-credit

“Residential energy property that meets or exceeds the Consortium for Energy Efficiency (CEE) highest efficiency tier, not including any advanced tier, in effect at the beginning of the year when the property is installed qualifies for a credit up to $600 per item. Costs may include labor for installation.

Qualified property includes new:

-Pick a residential gas tank water heater between 20 and 55 gallons with a Universal Energy Factor (UEF) of 0.81 or higher (medium draw pattern) or 0.86 or higher (high draw pattern). 
-Pick a residential gas tank water heater larger than 55 gallons with a UEF of 0.86 or higher (high draw pattern).
-Pick a residential tankless gas water heaters with a UEF of 0.95 or larger.
Reference CEE – Consortium for Energy Efficiency Residential Electric Water Heating Specification: https://cee1.my.site.com/s/resources?id=a0V7V00000Ke9Wy

Consult with your tax professional if you have questions.