I have a water heater that is located in the furnace closet in my garage. I have no access to outdoor water. Is it possible to connect a "Y-valve" from the cold water inlet of the water heater, and then us that to run a hose for outdoor water? Thanks!

absolutely

Not sure what a "Y valve" is but should work.

would be better to add a tee fitting before the shut off valve to the water heater.

then on the new branch add a ball valve to control flow to the new hose bib.

In chapter 5 of UPC there is strict requirements on what materials can be attached to a water heater and distances.

The only "Y valve" I can think of would be something like a hose splitter like this?



This wouldn't really work as these valves are all hose threaded, he would have to transition from say 3/4" threads to male hose threads to one of these then back to 3/4" MIP to connect to the WH side. That's a lot of unnecessary transition plus these things are not full port. Should just install a 3/4" tee and use that branch to attach a hose faucet. If you do insert a tee do it upstream of your existing cold water inlet valve so your hose bib is not controlled by the WH valve, otherwise you have no hose usage if the WH is turned off for maintenance such as if you want to drain your WH you can't even back flush your drain valve with the hose right there because you cannot turn it on while the WH is off.

If you really want to use the garden Y you can do it much easier at the washing machine connection as that is already hose threaded. But a tee is much better.