In terms of energy savings, a side-arm water heater can save you money by capturing wasted distribution heat from your boiler and using it to heat domestic hot water used for sinks, showers and baths. Savings can be as much as 20% compared to the cost of operating a stand alone hot water heater, especially if it is electric. Please note that a side-arm heater does NOT improve or affect the boilers efficiency in any way, it only captures heat that would most likely have been wasted.

In terms of rebates, it depends on what kind of water heater you're planning to get. "Indirect" domestic hot water does not qualify for the federal tax credit for energy efficiency or local electric/gas utility rebates -- since they tend to be inefficient during non-heating months.

However, direct-fired gas, oil and propane water heaters with an Energy Factor ≥ 0.82 OR a thermal efficiency of at least 90% for the federal rebate. Electric heat pump water heaters also qualify.

You should also keep in mind that the federal tax credit can be applied to installation costs for these kinds of projects.