What's involved in moving a hot water tank to the garage
There are a lot of questions to ask before an answer can be given:

What climate are you in?
Is the garage heated or insulated?
Is the hot water heater gas, electric, oil, solar, nuclear, gerbil-powered?
Are going to do this yourself?

You can probably get some pretty good, free advice on this by calling one or two plumbers to come out and give you a quote and a recommendation.

It's a pretty big deal to move a hot water heater, even more so if it's gas or oil.  There's electrical code (220v?), pipes, etc.

What about just putting in a nice pan on the second floor with a drain under it...might be cheaper and easier...

source: none, i'm not a plumber or electrician, but I do a lot of my own stuff.