How Much Does it Cost to Replace a Water Heater?

The smooth operation of your home depends on some pretty uninspiring systems and appliances. They’re not exciting, but things can get pretty lively when they fail unexpectedly.

A prime example of this is your home’s water heater. This essential appliance provides the hot water you need for laundry, dishes, cooking, and bathing. It’s operation is fairly simple, but there is some variation in design and function that it’s good to know about, especially when the time comes to replace it.

First, Know Your Options

As with any appliance purchase, you will have several options to consider in selecting a new water heater. Models vary according to size and power source. Electric water heaters are generally more expensive than gas, but they cost less to operate over time.

Another consideration is your existing arrangement. If your current water heater is electric, it’s practical to replace it with an electric model. Otherwise you’ll need to factor in the cost of running a gas line to the location. Size also comes into play here. New regulations for efficiency have resulted in many new water heaters being considerably larger than older models, to accommodate added insulation. If it’s necessary to expand or reconfigure the space to accommodate a larger unit, you can expect added costs for installation.

When you’re considering the cost of a water heater, it’s important to know about their average lifespan.  Most water heaters, with proper maintenance, can last about 15 years. They are fairly uncomplicated machines, so most fail due to age, although they can “die young” if sediment is allowed to build up in the tank or leaks go undetected.

Extended lifespan is one of the advantages of the newer tankless or on-demand water heaters. These do not include a storage tank, so water is heated as it is needed, saving energy.  You can expect to get closer to 25 years of service from this type of water heater, but the purchase price is up to 3 times higher than conventional models, and installation will likely be a bit more complicated than just swapping out your old unit.

How Much Does it Really Cost?

If you’re buying a water heater, you may be planning a new installation or replacing an existing unit. In many cases, the water heater just wears out over time and becomes increasingly inefficient.

In other instances, the water heater has failed. This is inconvenient and means that the replacement has to be secured as soon as possible. It is also something that can be avoided through some pretty simple maintenance practices.

The water heater should be drained annually to get rid of any sediment that has settled in the tank. This is a fairly uncomplicated procedure. It clears the tank and flushes out impurities. Otherwise, minerals and sediment can build up and cause the unit to fail prematurely.  Regular maintenance and inspection will also alert you to a failing anode rode, the component that prevents the water heater itself from rusting. Replacing a corroded anode rod every 5 years can double the life of your water heater and prevent small leaks that can damage floors and walls over time.

If maintenance has been neglected, you can expect some extra costs to get the area in shape for the new unit. Beyond that, you’ll need to consider the price for the unit you choose as well as the cost of installation.

These costs vary widely, depending on where you live. Expect prices in the Bay Area to be well above the national average, for both the appliance itself and the labor to install.  So let’s get down to it.


To install a new, gas-powered, tankless unit, your approximate purchase price will be $2000 to $2500. In some cases, the gas line and exhaust venting will need to be upgraded, and with those added costs installation can run upwards of $3000, while a more straightforward installation will be around $1000.  These costs are somewhat offset by rebates offered by utility companies when you replace a conventional water heater with a tankless model.


Tankless water heaters are attractive due to the fact that they save about 30% in energy costs over the conventional models. SFGate reports that “based on the average retail price of electricity in California of $0.164 per kWh as of April 2013, for example, it would cost $736 annually to generate 64 gallons of hot water per day from the most efficient electric water heater. Generating the same 64 gallons per day would cost $227 annually based on the average price per therm of $0.93 for natural gas in California.”

That information helps to explain the difference in purchase price for tankless vs. conventional water heaters. While they cost more to operate, the “storage” models have a friendlier price tag than tankless heaters.  A 40-gallon gas water heater can be bought for just under $1000, and electric models are even less expensive, starting around $600 in many areas.  Expect to pay your plumber between $800 and $1200 for a relatively simple replacement installation.  

Hidden Costs

Finally, keep in mind that removing your old water heater can add around $500 to the overall cost for installation.

So there you have it. Not a minor expense, but one that every homeowner can anticipate. One way to reduce it is to give your existing water heater the simple maintenance it requires. This can prolong its life by as much as 5 years, and prevent the unit from failing unexpectedly.