Tankless vs Tank Water Heater Cost Calculator 2026

How the tankless vs tank comparison works

Everything starts with the useful heat: the energy that actually has to go into the water. Heating one gallon of water by one degree Fahrenheit takes 8.34 BTU, so a household using 64 gallons a day with a 70°F rise needs 64 × 8.34 × 70 = 37,363 BTU a day, or 13.64 MMBtu a year. That is the heat the household gets. What it pays for is the gas that produces it, and the two heaters need different amounts of gas to make the same heat, because their energy factors differ: the tank turns 60% of its gas into hot water and the tankless turns 95% into hot water. Gas is sold by the therm, and one MMBtu is 10 therms, so the annual cost is the gas input in MMBtu times 10 times the price per therm.

At the defaults — 64 gal/day, 70°F rise, tank EF 0.60, tankless EF 0.95, gas $1.50/therm, installed $1,200 tank vs $3,500 tankless — the useful heat is 13.64 MMBtu/yr. The tank needs 13.64 ÷ 0.60 = 22.73 MMBtu/yr of gas, which costs 22.73 × 10 × $1.50 = $340.94/yr. The tankless needs 13.64 ÷ 0.95 = 14.36 MMBtu/yr, costing $215.33/yr. The saving is $340.94 − $215.33 = $125.61/yr, and the $2,300.00 install premium takes $2,300.00 ÷ $125.61 = 18.31 years to pay back.

The worked example, line by line

Setup: 64 gal/day, 70°F rise, tank EF 0.60, tankless EF 0.95, gas $1.50/therm, installed $1,200 tank vs $3,500 tankless.

Line 1 — the useful heat. 64 × 8.34 × 70 × 365 ÷ 1,000,000 = 13.64 MMBtu/yr.

Line 2 — the gas each heater burns. Tank: 13.64 ÷ 0.60 = 22.73 MMBtu/yr. Tankless: 13.64 ÷ 0.95 = 14.36 MMBtu/yr.

Line 3 — the annual cost. Tank: 22.73 × 10 × $1.50 = $340.94/yr. Tankless: 14.36 × 10 × $1.50 = $215.33/yr.

Line 4 — the saving and the payback. $340.94 − $215.33 = $125.61/yr. $2,300.00 ÷ $125.61 = 18.31 years to pay back the install premium.

Line 5 — the 10-year totals. Tank: $1,200 + 10 × $340.94 = $4,609.39. Tankless: $3,500 + 10 × $215.33 = $5,653.30. Tank ahead by $1,043.91.

Line 6 — the 20-year totals. Tank: $1,200 + 20 × $340.94 = $8,018.78. Tankless: $3,500 + 20 × $215.33 = $7,806.60. Tankless ahead by $212.18.

Every branch, checked

Gas at $1.00/therm: the tank costs 22.73 × 10 × $1.00 = $227.29/yr and the tankless $143.55/yr, so the saving shrinks to $83.74/yr and the payback stretches to 27.47 years — longer than either heater is likely to last. Cheap gas kills the tankless case: the saving is proportional to the gas price, so a third off the price is a third off the saving.

Gas at $2.50/therm: the tank costs $568.23/yr and the tankless $358.88/yr, so the saving grows to $209.35/yr and the payback falls to 10.99 years. Expensive gas is the tankless heater’s best friend: every cent on the gas price widens the gap between the efficient heater and the wasteful one.

Tankless EF 0.82: a non-condensing tankless needs 13.64 ÷ 0.82 = 16.63 MMBtu/yr, so it costs $249.47/yr — only $91.47/yr less than the tank — and the payback stretches to 25.14 years. The condensing premium pays for itself: a 0.82 tankless saves barely more than a third of what a 0.95 one saves, and at that rate it may never pay back its install premium at all.

40 gal/day: a smaller household needs only 8.52 MMBtu/yr of useful heat, so the tank costs $213.09/yr and the tankless $134.58/yr — a saving of only $78.51/yr and a payback of 29.30 years. Low usage is the tankless heater’s worst case: the saving is proportional to how much hot water you use, so a single person or a couple may never recoup the install premium.

Reverse — the break-even gas price over 15 years: over 15 years the tankless saves 15 × 8.37 MMBtu/yr × 10 therms/MMBtu × P, where P is the gas price. Set that equal to the $2,300.00 install premium and solve: P = $2,300.00 ÷ (15 × 8.37 × 10) = $1.83/therm. At gas prices above $1.83/therm, tankless wins by year 15; below it, the tank still wins at 15 years and only the 20-year horizon flips.

What the defaults assume

The model counts gas only: it does not count the electricity a tankless heater uses for its fan and controls (small, a few dollars a year), the pilot light on an older tank (a few dollars a month), maintenance, descaling, or replacement. It assumes gas prices stay flat for 20 years — in reality they move, and the tankless case gets better when gas gets dearer and worse when it gets cheaper. It assumes both heaters last the full horizon, which is generous to the tank: a gas tank typically lasts 8 to 12 years, so a 20-year tank total should really include a second tank, while a tankless typically lasts 20 years or more. It also assumes the install prices you enter are complete: a tankless install can need a larger gas line, a new vent, or a condensate drain, and those are often quoted separately. The 8.34 BTU per gallon per degree is the heat capacity of water; the energy factors are the DOE-rated figures for typical units. Rounding convention: money is rounded to cents and all figures are computed from unrounded values, rounded only for display.

Output · formula · meaning

Who uses this

• The homeowner replacing a dead tank: the plumber quotes $1,200 for a tank and $3,500 for a tankless — they learn the tankless saves $125.61/yr but takes 18.31 years to pay back, so they take the tank and spend the difference on insulation instead.
• The family of four with dear gas: at $2.50/therm their saving is $209.35/yr and the payback is 10.99 years — so they go tankless, and the endless hot showers are a bonus.
• The couple in a small house: using 40 gallons a day, they learn the saving is only $78.51/yr with a 29.30-year payback — so they keep the tank and put the money toward a heat-pump water heater instead.
• The renovator choosing a condensing unit: they compare a 0.82 tankless against a 0.95 one and learn the condensing unit saves $125.61/yr against $91.47/yr — so the dearer unit is the cheaper one over time.

Accuracy & limitations

The math is exact for the numbers you enter: the useful heat is gallons times 8.34 BTU per gallon per degree times the rise times 365 days, the gas input is the useful heat divided by the energy factor, and the cost is the gas input times 10 therms per MMBtu times the gas price. What the model cannot do is know your household: the gallons per day is an estimate (about 16 gallons per person per day is typical, but a long shower or a big soaking tub changes it fast), the temperature rise depends on how cold your incoming water is (colder in winter, colder in the north), and the energy factor is a rated figure, not a measured one. It leaves out electricity, maintenance, descaling, and replacement — and it assumes both heaters survive the whole horizon, which flatters the tank, since a gas tank typically lasts 8 to 12 years and a tankless 20 or more. Gas prices are assumed flat; if gas gets dearer, tankless wins sooner. For gas versus electric water heating, see gas vs electric water heater; for the right size of tank, see water heater size chart.