What is a tankless water heater?

A tankless water heater is one that doesn’t have a storage tank, meaning there is no standing water for it to keep warm.

Gas tankless water heaters with the Energy Star label qualify for a new federal tax credit of 30 percent, up to $1,500, if they are installed before Dec. 31, 2010.
 
Tankless water heaters don’t heat water until you turn on your hot-water faucet. So they use up to 50 percent less energy than a conventional water heater with a tank.
 
Sometimes called on-demand water heaters, tankless models are about the size of a large medicine cabinet and heat water directly. When you turn on the hot-water tap, cold water travels through a pipe to the tankless heater. There, a gas burner or an electric element heats the water.
 
That’s good news for families with lots of people who need to shower in the morning. Because a tankless heater doesn’t store water in a tank like your conventional heater, it can’t run out of hot water. So you never have to worry about your storage tank emptying its hot water and making you wait for a new batch to heat up.
 
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