Tip
Tank vs tankless vs heat pump
Tank water heater (storage)
- Pros: cheapest installed, simple to repair, works in tight spaces
- Cons: 24/7 standby losses, slowest recovery, often shortest service life (10-12 years)
- Federal rebate: $600 max (only high-efficiency gas tanks), no HEAR (electric resistance is excluded)
Tankless (on-demand) water heater
- Pros: endless hot water, no standby loss, longer service life (15-20 years), wall-mount space saver
- Cons: $1,500-$3,500 installed (vs $1,000 for tank), needs gas line upgrade often, low-flow performance varies, hard water requires regular descaling
- Federal rebate: $600 max, ENERGY STAR required
Heat pump water heater (HPWH) — the IRA winner
- Pros: uses 60-70% less energy than electric resistance, biggest federal stack ($2,000 25C + $1,750 HEAR), 12-15 year service life
- Cons: needs ~700 cubic feet of conditioned space, makes noise (~50 dB), produces condensate (drain line required), cools surrounding room
- Federal rebate: $2,000 25C + $1,750 HEAR (income-eligible) + utility rebate
Quick decision matrix
| If you have... | Best choice |
|---|---|
| Cheap natural gas, large household | Tankless gas |
| Electric only, basement or garage placement | Heat pump water heater |
| Tight closet, can't relocate | Standard tank (electric or gas) |
| Income-eligible for HEAR + electric | Heat pump water heater (free or near-free with full HEAR) |
| Off-grid solar home | Heat pump water heater (most efficient with limited supply) |