For a tank, compare the first-hour rating
The first-hour rating is how many gallons of hot water a heater can deliver in one hour, starting with a full tank. The Building America Solution Center calls it a more useful number than tank size, especially when comparing gas, electric and heat pump models, and says it needs to easily meet your busiest period, usually morning showers. It's printed on the yellow EnergyGuide label.
Before you get quotes, write down what overlaps on a bad morning: two showers, a load of laundry, the dishwasher. Hand that list to every installer so they're all sizing for the same household.
For tankless, ask about the winter temperature rise
A tankless heater is sized by two numbers together: the most hot water flowing at once, and how many degrees it has to heat the incoming water. The gas tankless guide works an example: at about 52°F groundwater and a 120°F setpoint, the heater needs a 68°F rise, so you'd look for a model that delivers the needed gallons per minute at that rise or more. Incoming water is coldest in winter, which is when an undersized unit shows it.
So don't accept a headline gallons-per-minute figure. Ask the installer what the specific model delivers at your winter rise, and which fixtures it can run at the same time. If the answer is that people will have to take turns, you know what you're buying.
Gas tankless: the gas line and vent usually change
Tankless burners are much bigger than tank burners. The Department of Energy's tankless retrofit guideline gives an example of a tankless unit needing 199,900 BTUs where a typical tank needs 40,000, and notes many tank heaters run on ½-inch gas pipe while a tankless unit may need a ¾-inch branch line, depending on pipe length and your other gas appliances. A quote that just says "connect to existing gas" should get a follow-up question.
Most gas tankless units vent sideways through a wall instead of up the chimney, and many have separate intake and exhaust pipes. That matters if your water heater now shares a chimney flue with the furnace: removing it can leave the furnace alone on a flue that's now too big. The gas tankless guide says to have the contractor test the furnace's draft after the water heater comes off a shared flue. Also note that gas tankless units still need a 120-volt outlet for their controls and ignition.
Electric options: check the panel first
Whole-house electric tankless units draw 50 amps or more, and the DOE guideline says that calls for an evaluation of the electrical panel. It also notes they can be expensive to run as a whole-house heater in cold climates, so ask your electric utility about operating cost first.
A heat pump water heater is the other electric choice. If you're replacing a standard electric tank, the existing circuit is likely 240 volts at 25 or 30 amps, and a matching heat pump model is the simplest swap. If your panel is tight, the heat pump guide points to 240-volt models that draw 15 or 25 amps, or 120-volt plug-in models that avoid a new circuit. Heat pump units need air around them: a room of about 700 cubic feet or more, such as 8 by 12 feet with an 8-foot ceiling, is enough, and the condensate has to drain somewhere. Leave panel and circuit work to a licensed electrician.
What a complete quote should spell out
Ask for equipment, gas or electrical upgrades, venting, condensate drainage, haul-away and permits as separate lines, with anything "to be determined" called out. The federal gas tankless installation checklist calls for an emergency drain pan with a ¾-inch drain line wherever a leak could damage the home, a gas leak test after installation, and a review of operation and maintenance with the homeowner. The heat pump installation checklist covers clearances, airflow and condensate. If a quote leaves those out, ask why. Our contractor hiring checklist covers the rest of what to get in writing.
Permits in Philadelphia and nearby townships
In Philadelphia, a water heater replacement needs an L&I plumbing permit, and a licensed master plumber has to oversee the work. L&I's Plumbing Permit page fee table lists $31 for a water heater in a one- or two-family home (a filing fee and City surcharge also apply), and says the permit may be issued immediately when the contractor applies. Gas line, vent or electrical changes may bring their own permits. Our guide on which plumbing jobs need an L&I permit has the details. In Bucks or Montgomery County, call your township's building office with the specifics: fuel type, tank or tankless, any vent or electrical change. For quotes, see our plumbing services page.