I was told to change my water heater vent from 3" to 4" by code so that is what Im doing. Is it ok to use a 3 to 4 inch increase right off the draft hood? Also, my chimney liner is 5" because the water heater used to be common vented with the furnace but not anymore since the furnace was upgraded. So basically I have that existing 5" liner so would I just run a 5 to 4 inch decrease right out of the chimney liner then a 4" elbow off that then connect my round pipe?
Did you change your tank and have now been asked to up the vent size?
I mention this because folks sometimes keep the vent hood that was attached to the old vent piping, not knowing that many of the new draft hoods that comes with newer tanks have a built in draft restricter designed to work with the new smaller and more draft susceptible pilots.
Most HWT draft hoods can directly accommodate either 3" or 4" venting so reducers are not used.
If your chimney liner extends out of the chimney and is sleeved then the cap with a 3" hole can just be increased to 4" but make sure you adequately sheet metal screw all the fitting in place with 3 screws on each fittings end.