Federal tax credit can help make heating your water a ‘tankless’ undertaking

(Editor’s note: The following is the seventh of an eight-part series designed to reduce energy costs in the home.)

By insulating hot water piping and turning your water heater down 10 degrees, you can save up to 5 percent annually on your hot water heating costs. The average life of a standard hot water heater is 10 to 15 years, depending on many factors, such as the water pressure in your house and the quality of the water.

Many of the tankless water heater manufacturers state that you will enjoy up to a 40 percent energy savings by switching from a standard (tank type) water heater to a tankless model.

While that may be partially true, there is another factor to consider. The average family of five spends about $35 per month on water heating costs. If the savings is truly 40 percent, that would equate to a savings of roughly $14 per month. The average installed cost of a 40-gallon high recovery tank-type water heater is $800, while the average installed cost of a high quality tankless type is $2,700, a difference of $1,900. This means that for an average family of five, it would take roughly 11 years to break even on the energy savings.

However until Dec. 31 the federal government is giving a tax credit of 30 percent of the cost, with a cap at $1,500. The average tax credit would be $810 based upon the average installation cost. That means the break-even point would then be roughly just 6.5 years. Now the additional investment makes more sense.

Tankless water heaters save money because they only are heating the water when we are using it, as opposed to a tank-type heater that heats the water in the tank and stores it. The latter heats water whether we are using it or not.

The other big advantage of tankless water heater is that you’ll never run out of hot water. We’ve all taken cold showers after our teenagers take the typical 30 minute lounge in the water. With a tankless system, you’ll never have to worry about running out of hot water.

Other helpful savings tips: Run the washing machine only with full loads and always rinse with cold water. Don’t leave the water running while brushing your teeth or shaving. Only run your dishwasher with full loads and check to see if it has an energy-saver option.

Joel Wensley is a licensed mechanical contractor in the state of Michigan and president of Mechanical Heating & Cooling in Dearborn Heights.