If it's on blocks like most water heaters. Just shut off the
gas/electric, drain the water, and then it's pretty light, so you can
have a friend ever so slightly lift it about 1/4" remove one block at a
time, and put one tile there. Then go to the next block and do the same.
Of course you tile the whole floor first except that square around the
water heater.
If there are no blocks, you can still do this, but not as easily.
If this is a gas heater, be sure to check for any gas leaks afterwards,
since you disturbed the pipes. And turn on the water slow and watch for
any water pipe leaks too. If however, there are no blocks under it, you
could just cut the tiles to fit around it too. Make a tight fit, and no
one will ever know. Save a few tiles in case you ever replace the heater
and the size differs.