Heat pump vs furnace: cost, efficiency and which to pick

Quick answer: An air-source heat pump typically costs $6,500–$13,000 installed and replaces both your furnace and your air conditioner. A gas furnace typically costs $5,000–$7,500 installed (for a 2,000 sq ft home with existing ducts) but only heats. Heat pumps usually win on running costs in mild and moderate climates and where electricity is cheap compared with gas; furnaces still make sense in very cold areas with cheap natural gas — or you can combine both in a "dual fuel" system.

Key takeaways

• A heat pump replaces both your furnace and AC — compare it with the cost of two systems.
• Modern cold-climate heat pumps keep heating well down to about -5°F to -15°F.
• Heat pumps deliver about 2–4 units of heat per unit of electricity, so they're far cheaper than electric resistance heat.
• Ductless mini-splits work well in homes without ducts or for additions.
• The federal 25C credit ended after 2025 — utility and state rebates can still cover a large share.

If your furnace is getting old or your AC just died, this is the decision you will face. Below we break down the upfront cost, what each system costs to run, how long they last, and a simple way to decide.

#How each system heats your home

A furnace makes heat. It burns natural gas, propane or oil (or uses electric heating elements) and blows the warm air through your ducts. A modern gas furnace turns 80% to 98% of its fuel into heat — that percentage is its AFUE rating.

A heat pump moves heat instead of making it. In winter it pulls heat out of the outdoor air (even cold air holds some) and pumps it inside; in summer it runs in reverse and works as an air conditioner. Because it moves heat rather than creating it, a heat pump is generally two to three times more efficient than electric resistance heating, according to Carrier.

That one difference — moving heat versus making it — explains almost everything else: the running costs, the cold-weather limits and the fact that one heat pump can replace two machines.

#Upfront cost compared

Ranges compiled from Carrier and Inch Calculator cost guides. Your quote depends on home size, duct condition and local labor rates.

The comparison that matters is not "heat pump vs furnace" but "heat pump vs furnace plus air conditioner". If your AC is also near the end of its life, replacing both with one heat pump is often cheaper than buying two separate systems.

What about federal tax credits?

Many older articles still promise a 30% federal tax credit (up to $2,000) for heat pumps. That credit — the Energy Efficient Home Improvement Credit, section 25C — ended for equipment installed after December 31, 2025. It does not apply to systems installed in 2026. Some utilities and states still offer their own rebates, so ask your installer and check your utility's website before you sign.

#Running costs: which is cheaper to operate?

This depends on two local prices: what you pay for electricity and what you pay for gas.

• The average US home paid about 18.2 cents per kWh for electricity in 2026 (EIA forecast), up from 17.3 cents in 2025.
• A heat pump turns each unit of electricity into roughly 2 to 4 units of heat in mild weather. As the outdoor temperature drops, that ratio falls.
• A gas furnace's efficiency stays the same no matter how cold it gets.

Rule of thumb:

• Mild to moderate winters (most of the South, the West Coast, the Mid-Atlantic): a heat pump almost always costs less to run, and you get efficient AC too.
• Cold winters with cheap natural gas (the upper Midwest, northern New England): a gas furnace can be cheaper in the coldest months. A cold-climate heat pump closes much of the gap.
• Homes heated with propane, oil or electric baseboard: a heat pump usually saves the most here, because those fuels are expensive.

#Lifespan and maintenance

A heat pump wears out sooner mainly because it works all year. A furnace sits idle all summer. When you compare lifetime costs, remember a heat pump is also doing your air conditioner's job.

#Comfort and safety

• Air temperature: furnace air feels hotter at the vent (often 120°F+). Heat pump air is warm but gentler, and the system runs longer cycles for even temperatures.
• Combustion safety: a heat pump burns no fuel, so there is no carbon monoxide risk from the heating system itself. With any gas appliance, keep working CO detectors.
• Noise: both are quiet indoors. A heat pump has an outdoor unit, like a central AC.

#Dual fuel: the best of both

A dual fuel (hybrid) system pairs a heat pump with a gas furnace. The heat pump handles most of the year, and the furnace takes over automatically when it gets very cold. If you already have a good furnace and need a new AC, swapping the AC for a heat pump is a low-risk way to cut your gas use.

#How to decide in 5 questions

1. Is your AC also old? If yes, lean heat pump — you replace two systems for the price of one.
2. How cold does it get? Many days below about 5°F? Get a cold-climate model or dual fuel.
3. What fuel do you use now? Propane, oil or electric resistance? A heat pump will likely save you a lot.
4. Do you have gas service? No gas line means a furnace is a much bigger job — heat pump wins.
5. How long will you stay? Ask installers for a running-cost estimate for your home over 10 years, not just the install price.

#Tips for getting a fair quote

• Get at least three written quotes from licensed HVAC contractors.
• Ask for a Manual J load calculation. Oversized systems cost more and short-cycle.
• Ask whether your ducts need repairs — leaky ducts waste heat with either system.
• Schedule in spring or fall when contractors are less busy, if your old system can wait.

#Types of heat pumps and what they cost

#Cost per unit of heat: a quick comparison

Using typical 2026 prices — electricity 18¢/kWh, natural gas $1.50/therm, propane $2.80/gallon:

Where electricity is cheap or gas is expensive, the heat pump wins clearly. Where gas is very cheap and winters are long and harsh, a high-efficiency gas furnace — or a dual fuel system — can still come out ahead.

#Cold-climate heat pump checklist

If you live where winters regularly drop below 10°F:

• ☐ Choose a model on the NEEP cold-climate heat pump list
• ☐ Look for strong output at 5°F (ideally 70–100% of rated capacity)
• ☐ Variable-speed (inverter) compressor
• ☐ High HSPF2 rating (heating efficiency)
• ☐ Plan backup heat — electric strips or an existing furnace — for the coldest days
• ☐ Mount the outdoor unit above snow level with a clear drain path for defrost water

#Common heat pump myths

• "Heat pumps don't work in the cold." Older models struggled; today's cold-climate units heat well below 0°F.
• "They blow cold air." Heat pump air is warmer than room air but cooler than a furnace's blast — it runs longer, steadier cycles.
• "You should never set them back." Small setbacks (2–4°F) are fine; big setbacks can trigger expensive backup heat. Smart thermostats designed for heat pumps handle this.
• "They're always more expensive to run than gas." It depends on your local electricity and gas prices — run the numbers above.

#Frequently asked questions

Is a heat pump cheaper than a furnace?

To buy and install, a gas furnace alone is usually cheaper. But a heat pump also replaces your air conditioner, so against a furnace plus a new AC, a heat pump is often cheaper overall. To run, a heat pump is usually cheaper in mild and moderate climates.

Do heat pumps work in cold weather?

Yes. Cold-climate heat pumps are built to keep heating well below freezing. Standard models lose efficiency as temperatures drop, which is why very cold regions often use a backup heat source or a dual fuel system.

Can I still get a tax credit for a heat pump in 2026?

Not the federal 25C credit — it ended for equipment installed after December 31, 2025. Check your state and electric utility for local rebates, which still exist in many areas.

How long does a heat pump last compared to a furnace?

A heat pump typically lasts 10 to 15 years and a gas furnace 15 to 25 years. The heat pump runs all year for heating and cooling, which is why it wears faster.

Are heat pumps noisy?

Modern inverter heat pumps are quiet — many outdoor units run around 50–60 dB, similar to a quiet conversation. Defrost cycles can cause a brief whoosh.

Do I need backup heat with a heat pump?

In mild climates, often not. In cold climates, backup electric strips or a furnace (dual fuel) cover the coldest days.

What temperature should I set a heat pump to in winter?

Keep a steady setting around 68°F and avoid large setbacks, which can turn on backup heat. See our smart thermostat settings guide.

Can a heat pump work without ducts?

Yes. Ductless mini-splits mount on walls or ceilings and need only a small hole for the refrigerant line.

#Sources

• Carrier — How much does a heat pump cost? (2026 guide)
• Inch Calculator — Heat pump cost guide
• Inch Calculator — Furnace installation cost
• U.S. EIA — Short-Term Energy Outlook, electricity prices
• Trane — Federal tax credits for energy efficiency
• NEEP — Cold climate air-source heat pump list