7 Critical Steps To Installing A Tankless Water Heater In 2025 (And 5 Mistakes That Will Cost You Thousands)

The shift to tankless water heaters is accelerating in 2025, driven by soaring energy efficiency standards and a desire for endless hot water, but the installation process is more complex than a traditional tank. Unlike a simple tank replacement, installing an on-demand unit—whether gas or electric—involves critical upgrades to your home’s infrastructure, including gas lines, electrical systems, and complex venting. This comprehensive guide provides the most current information, including updated 2025 cost data and essential regulatory changes, to help you navigate the process safely and efficiently.

As of December 18, 2025, the biggest factor impacting new installations is the looming federal regulation: a new Department of Energy (DOE) rule will ban non-condensing gas-fired tankless water heaters starting in 2029, making high-efficiency condensing units the future standard. This means any installation today should prioritize future-proofing, focusing on proper sizing (measured in GPM or Gallons Per Minute) and adherence to local building codes, which are becoming stricter around venting and gas line sizing to accommodate the unit's high BTU demands.

The 2025 Tankless Water Heater Installation Cost Breakdown

The total cost to install a tankless water heater varies dramatically based on whether you are replacing an existing tankless unit (a simple swap) or converting from a traditional tank (a complex conversion). Professional installation is highly recommended due to the specialized nature of the work, especially with gas units.

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Professional Installation vs. DIY Costs

• Unit Cost: A quality whole-house unit (from brands like Rinnai, Navien, or A. O. Smith) typically costs between $1,000 and $2,500.
• Basic Installation/Swap: The national average cost for a simple installation (where infrastructure is already in place) is around $1,225, with prices ranging from $717 to $2,090.
• Conversion Installation (Tank to Tankless): This is the most expensive scenario. It includes labor for new venting, gas line upgrades (often from 1/2-inch to 3/4-inch or 1-inch piping), electrical work, and plumbing. Professional installation costs for a full conversion often start around $2,781 and can go up to $5,500 or more, depending on the complexity of the required upgrades.
• Permits: Local building codes almost always require a permit for a water heater replacement, which adds to the total cost but ensures the installation meets safety standards.

The higher upfront investment is offset by the unit's superior energy efficiency (up to 52% more efficient than standard tanks) and a longer lifespan of 20+ years.

Gas vs. Electric: Critical Installation Differences

The choice between a gas and electric tankless water heater dictates the entire installation process, as their infrastructure demands are vastly different.

Gas Tankless Water Heater Requirements

Gas units (Natural Gas or Propane) are powerful and offer higher GPM, making them ideal for whole-house applications, but their installation is significantly more involved:

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• Gas Line Upgrade: This is the most common hurdle. Gas tankless heaters require a substantial amount of BTUs, often necessitating an upgrade of the existing gas line to a larger diameter (typically 3/4-inch or 1-inch) to ensure adequate fuel supply.
• Venting System: Gas units produce combustion exhaust (flue gas) that must be safely vented outside. Modern high-efficiency condensing units use specialized, less expensive PVC or polypropylene venting, while older non-condensing units require expensive stainless steel or Category III venting. The venting must be a direct vent system and cannot use an old chimney.
• Electrical Connection: Even a gas unit requires a standard 120V electrical outlet to power the circuit board, fan, and igniter.

Electric Tankless Water Heater Requirements

Electric units are generally easier and less expensive to install because they do not require venting or gas lines. However, they demand a massive amount of electricity:

• Electrical Service Upgrade: This is the major installation challenge. A whole-house electric tankless unit typically requires two or three dedicated 40-amp or 50-amp double-pole breakers and heavy-gauge wiring, often requiring an electrical service upgrade to your main breaker panel.
• No Venting: Since there is no combustion, no venting is required, which simplifies installation and allows for more flexible placement (e.g., in a closet or under a sink for point-of-use applications).
• GPM Limitation: Electric units can struggle to provide high GPM in colder climates, where the required temperature rise is significant. Proper sizing is absolutely critical to avoid performance issues.

7 Critical Steps for a Successful Tankless Installation

Whether you hire a professional plumber or attempt a DIY project (not recommended for gas), these are the essential steps for a proper installation.

1. Proper Sizing and Location Selection

Before buying, calculate your required GPM (Gallons Per Minute) by determining the number of fixtures (showers, sinks, washing machines) that will run simultaneously. A typical two-bathroom home might need 5-7 GPM. The unit's location must allow for proper clearances, easy access to the water lines (cold water inlet and hot water outlet), and a clear path for the venting (for gas units).

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2. Mounting the Unit

The unit must be securely mounted to a sturdy wall using the provided mounting bracket. Unlike a tank, a tankless unit is lightweight but requires precise alignment for plumbing and venting connections.

3. Installing Isolation Valves (Service Kit)

This step is non-negotiable for proper maintenance. Isolation valves (also known as service valves or flush kits) are mechanical devices installed on the water lines to isolate the unit from the home’s plumbing. They allow a technician to flush the heat exchanger annually to remove mineral buildup and scale, which is essential for warranty and longevity.

4. Plumbing Connections

Connect the cold water inlet and hot water outlet to the unit, typically using flexible stainless steel hoses. A pressure relief valve must also be installed to prevent over-pressurization and ensure safety.

5. Gas or Electrical Connection

This step requires professional expertise. For gas, the properly sized gas line (3/4-inch to 1-inch) must be connected to the unit's burner assembly. For electric, the dedicated high-amperage circuits must be wired directly to the unit. Always shut off the main utility supply before this step.

6. Installing the Venting System (Gas Only)

The venting must be installed according to the manufacturer's specifications and local codes. This involves running the vent pipe (PVC or stainless steel) from the unit to the exterior of the home, ensuring proper pitch and clearance from windows and doors. This is a common point of failure for DIY installations.

7. Final Flush and Testing

Once all connections are secure, the unit is powered on, and the gas or water supply is restored. The system should be purged of air, and the hot water flow rate (GPM) should be tested at various fixtures to ensure the unit can handle the hot water demand and achieve the desired temperature rise.

5 Costly Mistakes to Avoid During Tankless Installation

Ignoring these critical details is the fastest way to void your warranty, incur code violations, or suffer a system failure.

1. Incorrect Sizing (GPM): The single most common mistake. An undersized unit will not keep up with demand, leading to "cold water sandwiches" or lukewarm showers during peak usage. Always calculate your peak demand GPM based on your coldest incoming water temperature.
2. Ignoring Gas Line Piping Upgrades: A gas tankless unit requires far more fuel than a traditional tank. Using the existing, undersized 1/2-inch gas line will starve the unit of fuel, leading to inefficient operation and potential safety hazards.
3. Improper Venting Material or Clearance: Using the wrong type of vent pipe (e.g., using PVC on a non-condensing unit that requires stainless steel) or placing the vent termination too close to a window or intake will create a dangerous situation and fail inspection.
4. Skipping Isolation Valves: While the unit will function without them, neglecting to install isolation valves makes future maintenance (descaling the heat exchanger) impossible without a major plumbing effort. This leads to scale buildup, reduced efficiency, and premature unit failure.
5. Failing to Pull a Permit: Tankless water heater installation is a complex job involving gas, electrical, and plumbing systems. Local building codes require a permit to ensure the job is inspected by a qualified official, protecting you from faulty work and ensuring compliance with the new DOE standards.