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Is Tank or Tankless the Best Water Heater?


The way to determine the best water heater for your home is to ask yourself a few questions. Don’t assume that tank or tankless is the better choice for you based on what someone else may decide. Either type may be preferable, depending on the situation.

Your decision should consider capacity, fuel availability, energy efficiency and life cycle cost. Considering that water heaters account for as much as 18% of the utility bills in most homes, it’s important to choose wisely.

How Water Heaters Work

Storage tank heaters, gas and electric, heat cold water as it enters the bottom of a storage tank and distribute hot water through a water line at the top of the tank. As you use hot water the heater goes to work to keep replenishing the tank with hot water.

Tank size may vary from 20 gallons (for special use situations) to 80 gallons. The right size for your home depends on the number of people, number of bathrooms, when you take showers, as well as when you run clothes washers and dishwashers.

Also consider first hour rate, which is how much hot water a heater can deliver in an hour’s time. The calculation includes starting with a full tank and adds in how fast the heater can bring incoming cold water up to temperature. A smaller high-efficiency water heater may deliver more hot water per hour than a larger, less efficient heater. ENERGY STAR labels on water heaters display first hour rates.   

Homes with four people and 2.5 baths will typically need a 40-50-gallon tank. If you’d like to do some math of your own, the U. S. Department of Energy offers objective information and steps to follow for water heater sizing estimates to get the best water heater for your home.

Tankless water heaters heat and send water on demand whenever a hot water tap is opened or dishwasher or washing machine is operating. Cold water enters the unit and is heated as it passes through. Hot water flows as long as the system demands it. 

Tankless heaters come in different sizes, too, but capacity is measured in a flow rate of gallons-per-minute instead of storage capacity. If you shower while the dishwasher and washing machine are running, the flow rate may be as great as 7.5 gallons per minute.

Instant Heating Does Not Mean Instant Delivery

Don’t confuse instant heating of tankless water heaters with instant delivery of hot water to the tap. If you replace a tank-type water heater with tankless and put it in the same location, even the best water heater available will not deliver hot water any faster because the water must travel the same distance.

Wait time depends on plumbing system design, including the distance the water travels from heater to tap. Recirculating hot water systems make hot water available instantly, regardless of travel distance. If your home does not have a recirculating system, there are commercially available devices that can “borrow” cold water lines to recirculate hot water.

Gas vs. Electric

If your home or business does not have natural gas available, your logical choice is electric (solar systems are available at exponentially higher initial prices). If gas is available, consider that gas water heaters cost up to 30% less to operate, thanks to abundant gas supplies, and have lower life cycle costs. In addition, gas heats faster than electric, and you will have hot water during power outages.

Two Stages of Water Heater Cost

Think of water heater cost in two stages: purchase price and operating costs. A higher purchase price often is offset by lower operating costs that can add up to a lower cost of ownership over the useful life of the product. The classic illustration is the comparison between tank-type and tankless water heaters.

Tankless water heaters typically cost more to purchase but have significantly lower operating costs than storage tank heaters. Here’s why: even the highest efficiency storage tank heaters lose heat constantly. During daylight hours, when most people are not at home, a tank heater may turn on to reheat water half a dozen times or more. Ditto for overnight while you sleep. That does not happen with a tankless water heater.

Cost calculations must include the longer lifespan of tankless heaters – 20+ years, compared to 8-12 years for tank-type heaters.

Water Heater Maintenance

All water heaters require periodic maintenance to perform efficiently and safely, and to extend their useful lives. Storage tanks must be drained of sediment buildup, which can act to insulate water from the heat source. Also, the temperature-pressure-release (TPR) valve must be able to open to relieve pressure buildup, which in worst cases could cause the tank to explode.

Tankless heaters need to be flushed periodically with a safe chemical to remove calcium and magnesium scale buildup. Frequency of flushing depends on whether you have hard or soft water. One leading manufacturer recommends flushing in soft water areas every 4-5 years, but as often as annually if you live in a hard water area. This U. S. Geological Survey map shows regional breakdowns of water hardness.

Tank and Tankless Water Heater Comparison Summary

Storage Tank Water Heaters

On-Demand Tankless Water Heaters

Indoor installation only, require floor space

Indoor or outdoor wall-mounted installation

Simpler installation results in lower installation costs

Higher installation costs, especially if converting to tankless from storage type

Continuous hot water supply depends on tank size and replenish rate

Continuous hot water as long as tap is open

As water cools in tank, heater cycles on to reheat it; Energy loss is about 30%

No “standby loss” because water is heated as needed, not stored; total energy loss about 5%

Higher operating costs

Operating costs about 25% lower

Lower purchase and installation price, shorter lifetime of 8-12 years

Higher purchase and installation price, lifetime expectancy 20 years or more

Emergency water supply stored in tank

No emergency water supply

If tank leaks or fails, sudden discharge of water can cause home flooding

No danger of flooding because no tank involved


There is no one size fits all solution when deciding on the best water heater for your home or business. If you carefully consider capacity, fuel availability, energy efficiency and then weigh your requirements for short-term versus long-term cost of ownership, you will arrive at the best solution for you.

Billy Stevens

About the Author Billy Stevens

Billy Stevens’ built a scratch plumbing business into one of the USA’s most highly regarded home service businesses between 1995 and 2011. He launched billyGO in 2018 to bring new convenience, efficiency and security to home services with his proprietary mobile app. Customers schedule their own appointments at times they prefer. See how it works at