How Much Does It Cost to Install or Replace a Water Heater?

Reviewed by Joe Roberts remodeling expert. Written by Fixr.com.

How much does water heater installation cost?

The average homeowner spends about $2,000 to replace their water heater. Despite the high cost, it’s best to replace your home’s hot water heater as soon as it’s nearing the end of its lifespan—typically around 10 to 15 years. Waiting until the system fails completely could leave you without hot water for a few days since local plumbers may not be available when your heater dies.

There are a lot of factors that can affect the price of water heater replacement. For example, oil-fired water heaters tend to cost more than gas or electric water heaters. Similarly, a water heater with a larger tank will typically cost more than a smaller one, though tankless water heaters usually cost more than tank water heaters.

Accounting for all these different factors, the price range for water heater replacement is pretty wide. On the low end, it can cost as little as $600, while at the high end, prices can exceed $6,000. This means that getting a quote from a plumber who’s inspected your current water heater is the only way to get a price you can really bank on.

We can give you a good idea of what you should expect to pay. Keep reading, and we’ll break down the various factors that can affect the price of water heater replacement. We’ll also throw in a few money-saving tips and point you to several ways to cover your new water heater’s costs if money is especially tight.

Factors that can affect your water heater replacement costs

The water heater’s fuel

The fuel a water heater runs on is a primary determiner of its total cost. Here’s a breakdown of the average prices for different types of water heaters:

Water heater installation costs by fuel type

These prices include average material and labor costs for installing a new water heater and removing an old one. 

They don’t include the additional costs to install new fuel lines, electrical wiring, expansion tanks, or other necessary peripherals, though. Exactly what additional components you need will depend on the type of your old water heater and the type you replace it with. 

This means that converting to a water heater type that’s different from your old one will add significant additional costs to this project.

The benefits and drawbacks of different water heater types

Natural gas heaters

Natural gas models are usually considered the best water heaters for budget-conscious homeowners. These systems heat water by burning natural gas underneath the system’s water tank. Think of a pot of water boiling on a gas stove. It’s the same principle. Because natural gas is usually cheaper than electricity, these systems tend to operate more cost-efficiently than electric water heaters.

The main downside of gas water heaters is that they require natural gas lines, so if your city doesn’t offer natural gas as a utility, this type of system isn’t an option for you, and you’ll have to opt for something else.

If natural gas is available in your area, but your home doesn’t already have a gas line in the correct place, you’ll need to pay extra to install one. A new gas line typically costs a couple hundred dollars.

Similarly, a gas-fired water heater requires a direct vent or flue to pump out the harmful gasses that combustion creates. If you need to install a flue, this will add another $100 to $200 to the project. 

Electric water heaters

The primary benefit of an electric water heater is simplicity. These systems heat water by warming electric coils in the water tank, working like electric stoves. These systems hook up to your home’s power, requiring a water line and electrical wiring. They don’t require any additional fuel lines.

Also, since electric systems don’t use combustion, they don’t need vents or flues to expel harmful exhaust. All this means that installing an electric water heater could cost you less than most other systems unless your home is already equipped for those other systems. 

As we said, though, the average price of electricity means electric systems generally lose out to gas water heaters in terms of overall cost-effectiveness.

Propane and oil water heaters

These two systems are good substitutes for natural gas heaters, so they’re often installed in homes where natural gas isn’t available. 

They both require a fuel tank to be installed on the property, though, since they don’t run on a mainlined public utility. And installing these tanks typically costs $1,000–$2,000. Additionally, keeping a fuel tank on your property comes with a few significant risks related to corrosion. On top of these extra costs, these types of systems also both require ventilation and fuel lines. 

After accounting for all these extra components, you’ll find that the total costs for these systems can greatly exceed the costs of installing gas or electric heaters. On the plus side, both propane and oil burn more efficiently than natural gas, though they’re also more expensive.

Solar water heaters

As you might expect, solar-powered water heaters are exceptionally energy efficient. They’re a great option if you want to keep your fuel costs down and minimize your environmental impact. However, they are fairly expensive to install.

On top of installing the heater itself, you’ll also need to install a solar panel for the system. Installing this solar panel can raise the costs of the job by several hundred dollars, though exact prices will depend on how large the panel needs to be to meet your heating needs. 

Many homeowners hybridize their solar-powered water heaters to ensure the hot water keeps flowing, even when the sun is down. This means that the system uses solar rays to heat water when the sun is out. When the sun is down, the system uses an alternative fuel source like natural gas or your home’s electricity to keep functioning.

Heat pump water heaters

Like solar water heaters, heat pump water heaters are incredibly energy efficient. They work by pulling and concentrating heat from the air or ground outside a home and using that heat to warm water inside their tanks. 

Unfortunately, these systems aren’t widespread, so you may have difficulty finding a contractor who carries and installs them in your area. If you can get one, a heat pump water heater is a great way to save money on energy costs without foregoing the luxury of hot water. 

The water heater’s tank size

The tank capacity of your water heater is another key cost factor, and the tank size you need will depend on how many people are in your home.

For a household of three people, a 50-gallon tank will usually hold enough hot water to meet everyone’s needs. On average, 50-gallon water heaters cost around $1,800. If your house has four people, you may very well need an 80-gallon tank, which will probably cost you around $3,000. 

Anyone with more than four people in their home should discuss tank sizing and pricing with their plumber. 

Expansion tanks

An expansion tank is a smaller, secondary water tank in a water heater’s system. These small tanks remove water from your heater’s primary tank as the water inside it warms and expands. This safety measure prevents pressure inside the primary tank from reaching dangerous levels. As such, all tank water heaters are required to have expansion tanks.

The good news is if your old water heater had a tank, you should already have an expansion tank. The bad news is that it may also need to be replaced since expansion tanks usually last less than 10 years. On average, installing a new expansion tank costs around $200. 

Tankless water heaters

As their name suggests, tankless water heaters don’t have water tanks. Instead, these systems run water over a heating element—either gas or electric—as it flows to a faucet, showerhead, or appliance, so you use the water immediately after it’s heated. It never goes into storage. Because of this, tankless water heaters are sometimes called water-on-demand heaters.

This design makes tankless models a bit more energy efficient than tank-style heaters. Water in a tank must be kept warm while waiting to be used, which means tank systems consume more energy per gallon of hot water than tankless systems. Additionally, a tankless unit can last up to 20 years, making these systems much more resilient than tank-style systems.  

There are two downsides to the tankless design, though. The first is hot water flow. Because these systems generate hot water as needed instead of heating a lot of water ahead of time, they usually can’t keep up with the demands of several people running hot water simultaneously. You can get around this shortcoming by installing multiple tankless water heaters in your home, but as you might expect, that will come at a significant price.

Speaking of prices, the other downside is that tankless water heater installation tends to cost a little more than installing storage tank water heaters. On average, a new tankless water heater costs $1,500 to $2,795. If you opt for a gas-burning tankless system, you’ll also need to add the costs of installing a fuel line and exhaust vent or flue if you don’t already have them. 

Where your water heater is

Water heaters are typically installed in garages or basements, but this isn’t always true. In some homes, the water heater may sit in a spot that’s difficult to reach, like a cramped closet or crawl space. If your water heater is in a hard-to-reach spot like this, or your crew has to ascend multiple flights of stairs to reach your system, it will require more labor—and labor costs—to replace it. 

Cost ranges for a new water heater

The budget option

Repair costs are usually much lower than the cost of a new unit, so the cheapest way to get hot water flowing again is to opt for water heater repairs instead of getting a replacement. For example, replacing your system’s anode rod or repairing the fan in its power vent will be hundreds of dollars cheaper than taking the whole system out and getting a new one.

Unfortunately, affordable repairs aren’t always viable and wholesale replacement might be your only option. If this is the case, simply get a new heater of the exact same type as your old one. This will ensure you don’t have to add supply lines, fuel tanks, or ventilation systems, thereby keeping your costs relatively low. 

If you no longer need all the storage tank capacity that your old system offered, you can save a couple hundred dollars by opting for a system with a smaller water tank.

While the labor costs for water heater unit replacement typically account for about $500 of the total project costs, we don’t recommend going the DIY route on this project. Improperly handling or installing components of your system’s plumbing can result in leaks, flooding, excess sediment in your water, and inefficiencies. In extreme cases, DIY water heater replacement can even result in electrocution and explosions.

Lastly, DIY replacement could very well void the warranty on your new water heater. If your water heater breaks at any point down the road, even for reasons unrelated to your installation job, you probably couldn’t make a claim to repair the damage if you installed the system yourself. 

Considering these risks, hiring professional plumbers to install your new water heater is best. If the price to hire pros is a serious concern, though, take advantage of your financing options to make the costs manageable. 

The mid-range option

If you don’t need to skimp on quality to save money on this project, then consider getting a more efficient type of water heater when you replace your old one. This might mean upgrading to a high-efficiency gas-burning unit or even a tankless water heater if you don’t need much water.

Upgrades like this usually cost more upfront, but keeping your monthly bills down can save you a lot of money in the long run.

Additionally, suppose your old water heater always ran out of hot water during your showers. In that case, you could also take this opportunity to get a unit with a bigger water storage tank. This will cost more, though, so only spring for a size upgrade if you have the funds. 

The high-end option

If you’ve got the money you need to upgrade to a highly efficient water heater, then swap out your old system for a hybridized solar-powered or heat pump system. 

Conversions like this can be expensive since they require carpentry and extra components. However, converting to either system will pay back in dividends over the years by keeping your energy costs very low. As a bonus, it will greatly minimize your home's environmental impact.

If you’ve noticed a greater need for hot water than your old system’s tank could provide, now is also a good time to consider upgrading your water heater tank size. 

How to pay for your new water heater

If your budget is tight this year, but you want to replace your busted heater with a pricey model, then there are a few ways to cover the expenses. Here are the four best methods for financing a new water heater without cash:

• Finance through your installer. Many plumbing companies offer in-house or third-party financing, so setting up a payment plan with your installers is possible. Ask about interest rates and payback periods during your initial consultation. Your plumbers may be able to offer you the best deal around.
• Take out a personal loan. If you have a good credit score and can stay on top of the monthly payments, taking out a personal loan might be your best option. It will likely come with a higher interest rate than most of your other options, though.
• Take out a home equity loan. A home equity loan is like a personal loan, but it bases the amount you can borrow on the equity you have in your home. You can borrow a lot of money if you have a lot of equity. The downside is that these loans use your home as collateral if you can’t repay the loan. This means that if you default, you could lose your home. On the plus side, they’re easier to pay back than personal loans since they typically have much lower interest rates.
• Open a HELOC. A home equity line of credit (HELOC) is similar to a home equity loan in that it uses your home as collateral for your debt. However, it works a little more like a credit card in every other way. Instead of a lender giving you a lump sum of money, as with a loan, a HELOC works more like a credit card you can repeatedly use on home improvement projects as long as you keep up with your payments. 

If you don’t like any of these options or none of them are viable for you, you could pay for your new heater with your normal credit card instead. This is inadvisable since it will probably come with a steep interest rate, though. You may be better off opting for a cheaper water heater replacement instead of getting a high-end model with your credit card. 

Other factors to consider

Warranty claims

If your old water heater failed before its time for reasons beyond your control, you may be able to make a warranty claim to cover the replacement costs. Look over the fine print in your user manual or call your manufacturer to learn more about your current unit’s warranty. 

Permits

In addition to the material and labor costs associated with water heater replacement, you’ll also have to pay the permit fees for this job. You can pull the necessary permits yourself by contacting your city’s permit office. Alternatively, your contractor can do this for you. Either way, you should expect to pay between $100 and $200 to get the necessary permits. 

Incentives for energy-efficient water heaters

Though high-efficiency water heaters tend to cost more than low-efficiency models, various incentives can make them more affordable. 

Among these are the federal tax credits for natural gas and heat pump water heaters. If you get an Energy Star-certified water heater of either type, you could claim a tax credit of 30% of your project costs the following tax season. This means that if you spent $2,000 on a new gas-powered water heater certified by Energy Star, you could knock $600 off what you owe the federal government the following year.

In addition to these federal tax credits, you can take advantage of a wide selection of local incentives. Many manufacturers and installation companies also offer rebates on high-efficiency water heaters. 

To find all the incentives you can apply for in your area, ask your contractor about available incentives during your consultation and check out this resource from DSIRE.

The cost of hot water

When your hot water stops flowing, it’s never cheap to get it running again. Even if you only have to make some light repairs to your system, you should expect to pay a couple hundred dollars. And if you have to fully replace your water heater, you could spend a couple thousand, especially if you get an upgrade or convert to a better heater type. 

More efficient systems are almost always worth the cost since they’ll bring down your power bills for the rest of their lives. And with the various incentives available for high-efficiency models, upgrading your water heater can still be surprisingly affordable.