For maximum energy efficiency it is best not to install a water heater in an unheated area or space such as the garage, an unfinished basement, or an unheated crawl space.
If you are building a new home, you want to plan ahead where to place the water heater. In terms of design, you should minimize the distance that the gas hot water will need to travel from the water heater tank to the major points of use (showers, kitchen sinks, dishwashers, etc.). Also consider where the gas supply lines will come into the house.
A gas water heater is a combustion appliance. It will need to be placed in a conditioned area where it can have pipes vent to the outside (typically straight up above the roof line). Closed combustion gas water heaters are also vented to the outside.
Check with local or state codes for specific recommendations and regulations about gas water heaters and location. Visit the eXtension web site to find Local Extension offices near you.
