The best water heater for most American households is a tankless water heater. Tankless water heaters, also known as on-demand water heaters, provide immediate hot water without the need for a storage tank. This makes them more energy-efficient and space-saving compared to traditional tank water heaters. According to the U.S. Department of Energy, tankless water heaters can save consumers up to 24% on their water heating bills.

The primary advantage of tankless water heaters is their energy efficiency. They only heat water when it's needed, which reduces standby heat loss. Traditional tank water heaters continuously heat and reheat stored water, leading to significant energy waste. Additionally, tankless water heaters have a longer lifespan, typically lasting 20 years or more, compared to the 10-15 years of a traditional tank water heater.

Another benefit of tankless water heaters is their ability to provide a constant flow of hot water. This is particularly useful in homes with multiple bathrooms or during peak usage times, such as during the morning rush hour. Tankless water heaters can also be installed in various locations, making them a versatile option for different home layouts.

While tankless water heaters have several advantages, they do have some drawbacks. The initial cost of installation is higher than that of a traditional tank water heater. Additionally, tankless water heaters may not be suitable for all homes, especially those with high hot water demand. However, the long-term savings and energy efficiency make tankless water heaters a worthwhile investment for many American households.