Can a Tankless Water Heater Replace My 40-Gallon Storage Tank?

If you own a home, ensuring it has a sufficient hot water supply is essential. For that reason, most homes depend on storage tank-style water heaters. They're the most popular water heater type, and homeowners appreciate their low cost and reliability. In the average household, you'll find a storage tank heater with a 40-gallon capacity at least.

However, more homeowners than ever are considering tankless water heaters when the time comes for a replacement. If you're unfamiliar with them, though, you may wonder if a tankless heater is a suitable replacement. Here's everything you need to know to make an informed choice.

What Is a Tankless Water Heater?

Tankless water heaters aren’t new, but their technology has come a long way. Early versions appeared in the early 20th century, decades after traditional storage tanks, but they didn’t become efficient or widely available until the 1970s and 1980s when improvements in heat exchangers and electronic controls made them viable for residential use.

A tankless water heater, as its name implies, does not preheat or store water for future use. Instead, it heats water on demand using a high-temperature heat source and a heat exchanger. In electric models, the heating elements generate the energy directly, while in gas models, a burner produces heat that transfers through the exchanger as water flows through the unit. This on-demand design delivers hot water instantly and efficiently, eliminating the need for a large storage tank.

The Advantages of Tankless Water Heaters

The biggest advantage of switching to a tankless water heater is an endless supply of hot water. Unlike storage tanks, tankless systems never run out, as long as they have power and fuel. When you turn on a hot water tap, a flow sensor detects the demand and activates the heating system. Within seconds, it begins delivering water at your preset temperature, maintaining that temperature as long as the tap remains open.

Tankless water heaters are also more energy-efficient than storage tank systems. Traditional models continuously heat and store a large volume of water, which leads to standby heat loss, the gradual cooling of water that requires constant reheating. Over time, this wastes energy, especially in homes where hot water usage is infrequent. By contrast, tankless units only activate when you turn on the tap, eliminating standby losses entirely.

According to the U.S. Department of Energy, households using less than 40 gallons of hot water per day may see up to a 34% energy savings, while high-use homes consuming more than 80 gallons daily can still save 8–14% compared to traditional storage tanks. No matter your usage level, switching to a tankless water heater can help lower your utility bills.

Another advantage is space efficiency. Tankless systems mount to the wall, freeing up valuable floor space, a bonus for smaller homes or tight utility closets. They also tend to last longer, with an average lifespan of 20 years or more when properly maintained.

The Disadvantages of Tankless Water Heaters

While tankless water heaters offer many benefits, they do come with a few drawbacks. One is the limited flow rate. Although they provide endless hot water, there’s a limit to how much they can heat at once. If you try to run multiple fixtures, such as a shower, dishwasher, and laundry, simultaneously, you might experience reduced water temperature or flow.

There are a couple ways to handle this. One way is to install two units in parallel, so a second heater kicks in when demand is high. Another is to use multiple units for different areas, such as one for bathrooms and another for the kitchen and laundry. Both solutions can address flow rate limitations but increase upfront costs.

That brings us to another consideration: installation expense. Tankless units typically cost about twice as much upfront as storage tanks, and installation costs may rise further if plumbing, venting, or gas lines need upgrades. However, because tankless systems can last twice as long as traditional ones, their lifetime costs often even out over time, especially in households with steady or high hot water demand.

Lastly, there’s often a short delay (10–15 seconds) before hot water reaches your tap because the system must start heating on demand. Installing a recirculation system can help minimize this wait time.

Considerations When Switching From a 40-Gallon Storage Tank to a Tankless Water Heater

If your home currently uses a 40-gallon storage tank, you’ll generally need a tankless model rated between 7 and 9 gallons per minute (GPM) to maintain similar performance in moderate climates. However, the right size depends on your household’s simultaneous hot water needs and your region’s incoming water temperature.

In colder areas like the Pacific Northwest, incoming water temperatures are lower, which means the system must work harder to heat it. This can reduce a tankless unit’s flow rate, so you may need a higher-capacity model or multiple units to keep up during winter months. A professional installer can help you determine the correct capacity by adding up the flow rates of all hot water fixtures you may use at once—like showers, faucets, and appliances.

It’s also important to remember that switching from a storage tank to a tankless model may require upgrading your gas line or electrical circuit to accommodate the higher power demand.

Maintenance and Longevity

To keep a tankless system operating at peak performance, regular maintenance is key. Hard water can cause mineral buildup inside the heat exchanger, reducing efficiency and lifespan. Most manufacturers recommend flushing and descaling the unit every 12–18 months, or more often in areas with hard water. Following a regular maintenance schedule can help your tankless water heater reach or exceed its expected 20-year life.

Local Tankless Water Heater Experts

If you live in Redmond, WA, and want to switch to a tankless water heater, Benjamin Franklin Plumbing® can help. We offer straightforward pricing and punctual service. In fact, we live by the motto: “If there’s any delay, it’s you we pay!”—we’ll pay you $5 for every minute we’re late, up to $300.

Our team of licensed plumbers receives ongoing training and undergoes background checks and drug screenings, so you can trust who’s entering your home. With our 100% satisfaction guarantee, you’ll always get professional, dependable service that meets your needs.

If you’re ready to upgrade your home’s water heater, contact Benjamin Franklin Plumbing® in Redmond today for expert tankless installation and honest, reliable advice.