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You see water leaking from the top of your water heater and you start to panic. You have every right to panic, although it may not be as bad as you think.
If the water is a yellow-rust color, I would worry. It likely means long term corrosion has damaged your water heater tank or a fitting on the tank. If the water is clear, you still may have damage at your tank or on a fitting, but follow the water.
Although the water may be pooling on the top of the water heater, it may be ending up there from somewhere else…like on your water supply line. See if the lines that connect to the nipples are wet. If they are, the leak is somewhere above the tank, likely at the copper flex line, a fitting, or the incoming supply valve. Touch the pipe with a piece of toilet paper. If it is leaking, the toilet paper will pick up the wetness. If either of the pipes above the water heater are wet, you will need to determine what is leaking and replace it.
If the pipes are dry, the best you can hope for is that one of the nipples are leaking at the top of the heater. The best case scenario is that you end up replacing a nipple or the rubber washer in between the nipple and the water supply line. The worst case scenario is that you are replacing the water heater.
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