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How Much Does it Cost to Replace a Water Heater?

how much does it cost to replace a water heater

If your water heater is on its last legs, you’re probably wondering how much it will cost to replace it. Water heaters come in a variety of sizes and models, so the cost can vary quite a bit. In this blog post, we will give you an idea of the factors that go into water heater replacement costs and what to ask when getting an estimate.

Is it Better to Fix or Replace a Water Heater?

Before we get into the cost of water heater replacement, let’s first discuss whether it is better to fix or replace your water heater. In most cases, it is more cost-effective to simply replace the water heater rather than trying to repair it. This is because water heaters are not designed to be repaired – they are built to last for a specific amount of time and then be replaced. Most water heaters have a lifespan of about 8 to 12 years, so if yours is around this age, it is probably time for a replacement.

Of course, there are always exceptions to the rule. If your water heater is relatively new and you have not been having any problems with it, then it may make more sense to try and repair it rather than replace it. However, if your water heater is older or has been having issues, then replacing it is probably the best option.

Read next: When to Replace Your Water Heater

5 Things to Consider When Buying a Hot Water Heater

We know that buying a new water heater isn’t something you do often. There are a variety of factors that you should consider when replacing your hot water heater:

  1. Size of the unit
  2. Fuel source
  3. Energy efficiency
  4. Storage type
  5. Space

1. Size of Water Heater

The size of your water heater is going to be one of the biggest factors in determining the cost. Water heaters are measured in gallons and you want to choose a size that is going to be able to meet the hot water needs of your household. If your current water heater is giving household members cold shower surprises then it may be a capacity issue and you should consider upgrading the size.

If you have a smaller home or live alone, then a 40-gallon water heater should be sufficient. If you have a medium to large home or multiple people living in your household, then you may need a 50-gallon or even an 80-gallon water heater.

2. Fuel Source

Water heaters come in both gas and electric models. Gas water heaters require a gas line connection and a vent which will be an extra expense if you don’t have one installed. Both gas and electric water heaters are rated by how much gas or electricity is used to heat water. Electric hot water heaters are measured in watts – the higher the wattage, the quicker it heats the water. Natural gas is measured in BTUs with the same idea – higher BTUs heat faster.

3. Energy Efficiency Ratings

Hot water heaters are rated high efficiency, mid-efficiency, and standard efficiency. To help consumers make decisions, the Department of Energy developed a national rating system called the Uniform Energy Factor (UEF).

This rating tells you how much hot water the heater can produce in real-world situations such as the First-Hour Rating (FHR), estimated yearly energy costs and how they compare to similar water heaters. The higher the UEF, the more energy efficient a hot water heater is. Energy-efficient models tend to cost more upfront, but they can save you money over time in energy.

4. Storage Type

There are two types of hot water heaters: tankless and ones with storage tanks. Tankless water heaters don’t have a holding tank but instead heat water on demand by passing it through a series of coils.

On the other hand, storage water heaters have a tank that holds water until it’s needed. The size of the holding tank is what determines how much hot water you have available at any one time. Storage tanks come in sizes ranging from 20 to 80 gallons.

Water heaters with a storage tank require room. If you are upgrading make sure that you have the right size tank to accommodate all the people living in your home and that you have a place to install it. Being chronically short of hot water could be a sign that your current water heater isn’t the right size for your household.

5. Space Required

If you’re replacing an old water heater, you probably can use the same type of unit. If you’re upgrading to a larger unit or changing from one type of water heater to another, you’ll need to make sure there’s enough space for the new unit. Tankless or on-demand water heaters don’t require much space but may need a natural gas line installed.

How to Size a Water Heater

To calculate the size of water heater you need, take into account the number of people in your household and how much hot water they use.

Showers are generally the biggest users of hot water in most households and can use up to 20 gallons of water per person. But there are other appliances and activities in your home that use hot water:

  • Dishwashers
  • Clothes washer
  • Food prep

Determine what time of day has the highest hot water use and calculate the gallons of water used during that high peak hour.

Example Sizing Calculation

  • 2 showers at 20 gallons each = 40 gallons
  • Dishwasher at 7 gallons = 7 gallons
  • Food prep at 1 gallon = 1 gallon

A total of 48 gallons at peak use means this household would need an FHR water heater of 50 gallons or more.

What Factors Influence the Cost of a Hot Water Heater?

There are many factors that can affect how much it costs to replace your water heater. Here are a few to keep in mind as you budget and discuss with your HVAC professional about your options.

  • Type of water heater
  • Type of fuel
  • Location & labor costs
  • Permits
  • Old Water Heater Disposal
  • Unforeseen factors

Type of Water Heater

As mentioned there are two main types of water heaters: tank and tankless. The type you chose to install will be a major factor in your water heater replacement cost. There are pros and cons to each and understanding the differences will help you make a decision on which is right for you and your family.

Tank vs. Tankless 

Tank water heaters are the most common type of water heater. They store hot water in a tank, and range in size from 30 to 50 or more gallon capacities. The average lifespan of a storage-tank water heater is about 8 to 12 years. There are also space requirements for a tank water heater. Storage water heaters are typically the most budget-friendly route.

Tankless water heaters heat water on demand, eliminating the need for space to install a storage tank. Water heater units that are tankless can last almost twice as long as storage tank units – up to 20 years. Tankless water systems are more expensive upfront but can offer significant savings over their lifetime.

Condensing vs Non-Condensing

There are two types of tankless water heaters on the market today – condensing and non-condensing. Condensing water heaters are more efficient than their non-condensing counterparts, with some models boasting efficiency ratings as high as 98%. These units work by heating water with waste heat from the flue gases. This means that they can recover some of the heat that would be lost in a non-condensing unit, making them more efficient overall.

Non-condensing tankless water heaters are still quite efficient, but not as much as condensing units. These units work by heating water with a burner, similar to how a traditional water heater works. The cost of a condensing tankless water heater will be higher than a non-condensing unit, but the increased efficiency can save you money in the long run.

Gas vs Electric vs Solar

Most water heaters use either natural gas or electricity to operate. There are also solar water heaters, but these are less common and tend to be more expensive. So, which type of water heater is best for you?

Gas water heaters are typically more expensive upfront. But they tend to be more energy-efficient than electric water heaters, so you’ll save money on your energy bill over time.

Electric water heaters are cheaper to purchase than gas water heaters, but they can be more expensive to operate. Electric water heaters are also easier to install which reduces your water heater replacement cost.

Solar water heaters are the most environmentally-friendly option, but they’re also the most expensive. If you live in an area with lots of sun, a solar water heater is a great option. But if you live in a cloudy climate, it might not be worth the investment.


The location of where your replacement water heater is going will be a factor in labor costs. Easily accessible areas usually cost less for a replacement water heater install than those in tight spaces or located in out-of-the-way places like barns. The more steps in the water heater replacement the higher the cost of installation.


Local governments determine what kind of permit is needed to replace your water heater. There may be a need for on-site inspection or changes in electrical lines, water lines, or gas lines to make the installation work. Ask your service professional if the estimate includes the cost of a local permit which means they manage the process and you don’t have to worry about it.

Disposal of Old Water Heater

Removal and disposal of your old water heater may not be included in your estimate so make sure to ask. If it isn’t then you will be responsible for junk pickup to have it hauled away. Jacobs Heating & Air Conditioning will take care of the removal and disposal of your old water heater so you don’t have to think about it.

Other Factors

Murphy’s Law says that “if anything can go wrong it will go wrong.” We aren’t that pessimistic and most of the time things tend to go smoothly, but it is always a good idea to budget for unforeseen additional costs not included in your estimate. New wiring, gas line upgrade, and other issues could crop up during your water heater installation and it is a good idea to be prepared.

Read next: 10 Noticeable Signs Your Water Heater is Going Bad

Can I Install a Replacement Water Heater Myself?

You could, but we wouldn’t recommend it. Gas water heaters need to be properly vented and the gas line needs to be hooked up correctly. One mistake could lead to a dangerous situation. If you are converting from an electric water heater to a gas you will need to install a vent and a gas line will need to be run.

Water heater installation is not a do-it-yourself job – leave it to the professionals at Jacobs Heating & Air Conditioning who will do the job quickly, efficiently, and up to code. A Jacobs consultant will discuss with you the three main factors to determine which water heater will work best for your home and family.

  • Space available for the new water heater
  • Household water needs
  • Budget

The Bottom Line – Water Heater Installation Cost

With all these factors in mind, a water heater replacement cost can range between $2,500 to $3,000 for a new tank unit, and $6,500 and $7,500 for a new tankless unit installed in place of an old tank. Additional plumbing costs as well as tank disposal can add to the final total.

Read next: How Long Do Water Heaters Last?

Water Heater Tune-Up and Replacement Services in Portland

There are many factors that go into deciding when to replace your water heater and Jacobs Heating & Air Conditioning experts are here to guide you. We carry a variety of hot water heaters so that your home or business has the best and most efficient water heaters around.

Avoid extra costs and fewer repairs by scheduling a maintenance check for your existing water heating system before issues arise. No matter what you need, we’re always just a phone call away.

Whether you are in the market for a new water heater or simply have questions about your current one, Jacobs Heating & Air Conditioning is here to help. We’ve been servicing the Portland area for over 70 years and our experience shows in the quality of our work. Give us a call today!

About the Author

Amanda Jacobs portrait

Amanda Jacobs, Internal Project Manager

Amanda Jacobs is an Internal Projects Manager and 3rd generation member of Jacobs Heating & Air Conditioning. She received her MBA from Seattle University and has worked for a leading HVAC training and consulting firm. When not talking HVAC on the Jacobs Blog, you can find her on the golf course or whipping up her famous vegan chili.