Your furnace is going to die in February. They always do. And when the technician stands in the basement and says “you could go heat pump,” you will have about a day to make a $10,000 to $20,000 decision that locks in your heating bill, your comfort and a good chunk of your household’s carbon footprint for the next fifteen years.
Most articles about this choice are written by people selling one side. We are not. We pulled the government price data, the field studies and the current rebate rules, ran the math for a real 2,000 square foot house in six different states, and wrote down where a heat pump wins, where a furnace wins, and where the honest answer is “it depends on your zip code.” Read this before the furnace dies and the decision will take ten minutes instead of a panicked day!
The short version
- A heat pump is the better buy when you are also replacing central air, when your electricity is cheap relative to gas (the Pacific Northwest, much of the South), or when you heat with oil, propane or electric baseboards today.
- A gas furnace still wins on operating cost in the cheap-gas Midwest and in high-electricity states like Massachusetts and California, often by $200 to $500 a year.
- The federal $2,000 heat pump tax credit ended December 31, 2025, and since May 2026 the big federal HEAR rebates no longer cover swapping gas for electric. Incentives in 2026 are mostly state and utility money, and they vary wildly.
- At national average prices, a heat pump needs a real-world seasonal efficiency (COP) of about 3.3 to tie a 95 percent furnace on fuel cost. Good units hit that in mild climates and fall short in cold ones.
- If the math is close, a dual fuel setup (heat pump plus your existing furnace as backup) is the grown-up compromise.
First, what a heat pump actually is
A heat pump is an air conditioner that can run backwards. In summer it moves heat out of your house. In winter it pulls heat out of the outdoor air (yes, even cold air has heat in it) and moves it inside. Because it moves heat rather than making it, it can deliver two to four units of heat for every unit of electricity it uses. The Department of Energy puts it plainly: a properly installed air-source heat pump can deliver up to three times more heat energy than the electrical energy it consumes.
That ratio is called the COP, coefficient of performance. COP 3 means three units of heat out for one unit of electricity in. Electric baseboard heat is COP 1. A gas furnace has its own number, AFUE: a 95 percent furnace turns 95 percent of the gas it burns into heat in your ducts, an 80 percent furnace sends a fifth of your money up the flue.
The catch is that a heat pump’s COP drops as it gets colder outside. A standard unit that runs at COP 3.3 on a 47°F day might manage 1.6 to 1.9 at 5°F. Cold-climate models, the ones with variable-speed inverter compressors, hold up much better: roughly 2.0 to 2.5 at 5°F, and they keep running down to about minus 13°F. ENERGY STAR’s Cold Climate label requires at least COP 1.75 at 5°F and at least 70 percent of rated heating capacity at that temperature. If you live anywhere that sees real winter, that label is the one to look for.
What they cost to install in 2026
Nobody publishes official installed prices, so these are ranges from cost surveys and a Consumer Reports member survey. Treat them as starting points for the quotes you actually get, and get three.
| System | Typical installed cost, 2,000 sq ft house |
|---|---|
| Gas furnace, 80% AFUE | $3,000 to $5,500 |
| Gas furnace, 95%+ condensing | $4,000 to $8,000 |
| Furnace plus new central AC | Roughly $8,000 to $15,000 |
| Ducted air-source heat pump (3 to 3.5 ton) | $10,000 to $20,000; Consumer Reports’ survey median was $12,200 |
| Cold-climate ducted heat pump | Several thousand more than a standard unit |
| Ductless mini-split, single zone | $2,000 to $5,000 |
| Ductless mini-split, whole house (4 to 5 heads) | $10,000 to $18,000 |
| Electrical panel upgrade, if needed | $1,500 to $4,000, more if the utility service line must change |
The row that matters most is the third one. A heat pump heats and cools. If your central air is also on its last legs, the fair comparison is heat pump versus furnace plus AC, and suddenly the gap is a few thousand dollars rather than ten. If your AC is five years old and your furnace is dying, the gap is real and a furnace is the cheaper fix today.
The operating cost math, done honestly
Here is the whole thing in one rule of thumb. Take your electricity price in cents per kilowatt-hour and divide it by your gas price in dollars per therm. (Your bills have both numbers; a therm is 100,000 BTU, and if your bill is in CCF or Mcf, one Mcf is about 10.4 therms.)
- Ratio under 9: a heat pump at a modest seasonal COP of 2.5 beats a 95 percent furnace on fuel.
- Ratio under 11: a heat pump needs COP 3, which good units reach in mild and moderate climates.
- Ratio over 12.5: a heat pump would need COP 3.5 or better all winter. Gas wins on fuel cost.
The national average in 2026 is about 18.2 cents per kilowatt-hour and about $1.55 per therm, a ratio of 11.7. That is why the national answer is a shrug: a heat pump roughly ties a 95 percent furnace at COP 3 and beats an 80 percent furnace comfortably. The regional answers are not a shrug at all.
A real house, six states
We modeled a 2,000 square foot house that burns 600 therms of gas a year for heat, which sits between the national single-family average (about 517 therms) and the Midwest average (about 629) in EIA’s household survey. The heat pump has to deliver the same heat the furnace does. Fuel costs only, using EIA’s 2026 state electricity prices and 2025 state gas prices; fixed monthly charges and equipment are left out.
| Where | 95% furnace | Heat pump at COP 2.5 | Heat pump at COP 3.0 | Who wins |
|---|---|---|---|---|
| US average | $932 | $1,217 | $1,014 | Furnace by $80 to $285 |
| Oregon | $968 | $1,029 | $858 | Heat pump by $110 at COP 3 |
| Washington | $1,020 | $962 | $802 | Heat pump by $60 to $220 |
| Massachusetts | $1,451 | $2,014 | $1,678 | Furnace by $230 to $560 |
| Minnesota | $636 | $1,086 | $905 | Furnace by $270 to $450 |
| Michigan | $632 | $1,438 | $1,199 | Furnace by $570 to $800 |
Two things jump out. In the Pacific Northwest, where hydro keeps electricity around 14 to 15 cents and gas has climbed above $1.60 a therm, a heat pump wins outright, and RMI’s data puts Portland and Seattle’s real heating-season COP at about 3.1, so the COP 3 column is the honest one. In the Midwest, gas at about a dollar a therm is simply too cheap for any air-source heat pump to beat on fuel, and Minneapolis’s heating-season COP is closer to 2.2. In New England the gas is expensive too, but 30-cent electricity swamps it.
One more honest number. A Minnesota field study of a 2017-era cold-climate unit measured a seasonal COP of about 1.8 in St. Paul, and 1.27 on days below zero. Newer units do better, but if a salesperson quotes you “COP 4” for a Minnesota winter, that is the number on a 47°F test stand, not your January.
Heating with oil, propane or baseboards? Skip the agonizing. NREL’s modeling of 550,000 homes found that households on electric resistance, oil or propane that also have air conditioning save money with a heat pump 92 to 100 percent of the time, typically $300 to $650 a year. Gas is the only fuel that makes this a close call.
The incentive picture changed this year, and not in your favor
If you read a heat pump article from 2024 or 2025, its rebate section is now wrong. Here is where things stand in October 2026.
- The federal 25C tax credit is gone. The 30 percent credit, capped at $2,000 for heat pumps, applied only to equipment placed in service by December 31, 2025. The IRS is explicit: nothing installed in 2026 qualifies. The 30 percent geothermal credit ended on the same date.
- The federal HEAR rebates no longer cover gas-to-electric swaps. The Inflation Reduction Act’s $8,000 heat pump rebate for income-qualified households still exists on paper, but revised DOE guidance in May 2026 limits it to replacing existing electric equipment with better electric equipment. Replacing a gas furnace does not qualify anywhere in the country under the new rules. The companion HOMES program, which pays for modeled whole-home savings, can still fund a gas-to-heat-pump job as part of a larger retrofit in the states where it is running.
- Most states have not launched the federal rebates anyway. As of this month roughly nine states have something open, a few have already run out of money, and about 37 have not started.
- State and utility money is what is left, and it is real in some places. Mass Save pays $2,650 per ton up to $8,500 for a whole-home cold-climate system, with a 0 percent loan up to $25,000. Efficiency Maine pays $1,000 to $3,000 per outdoor unit depending on income. Washington runs its own state-funded rebate for households under 150 percent of area median income, delivered through counties and cities, and Puget Sound Energy pays up to $4,000 for an income-qualified gas-to-heat-pump conversion.
- Oregon, our home state, is thin right now. The state’s $2,000 Heat Pump Purchase Program has exhausted its owner-occupied funding, the federal rebates have not launched, and Energy Trust’s standard heat pump incentives are written around replacing electric heat. A Portland household converting from gas can expect roughly $0 to $1,000 unless it is income-qualified. Check Energy Trust and the Oregon Department of Energy before you sign anything, because this moves.
The practical advice: look up your utility and your state energy office, then search DSIRE, the national incentive database, before you believe any number a contractor quotes you. And do not let a rebate deadline rush you into a system that loses the fuel math for fifteen years.
When the furnace still wins
We like heat pumps. We also like telling the truth. A gas furnace is the right call when several of these apply to you.
- Cheap gas, pricey electricity, real cold. Minnesota, Michigan, Illinois and most of the gas-heated Midwest. The breakeven COP there is 4.3 to 5.7, which no air-source heat pump reaches in a real winter. A heat pump in those states is a climate and comfort decision, not a money one, unless you are replacing the AC anyway.
- Very expensive electricity, any climate. California at 33 cents and Massachusetts at 30 cents. Even a COP of 3.5 costs more per unit of heat than a 95 percent furnace. Seasonal heat pump electric rates, which some utilities offer from November to April, can change this, so ask.
- A leaky, under-insulated house. Big heat loads push a heat pump into its electric backup strips (COP 1) more often and may require a larger, pricier unit. NREL found weatherizing first raises the share of homes that save money from 62 to 95 percent up to 82 to 97 percent. Seal and insulate before you size anything; here is the under-$100 version.
- A 100-amp electrical panel. A ducted heat pump with backup strips often needs a 200-amp service, which runs $1,500 to $4,000 and more if the utility has to touch the service drop. Low-amp and 120-volt heat pumps and smart load-sharing panels are the workarounds, and dual fuel sidesteps the problem entirely.
- You are keeping gas anyway. If the stove and water heater stay on gas, you keep paying the monthly connection charge, so the “disconnect and save” bonus never shows up.
- The budget is the budget. A 95 percent furnace at $4,000 to $8,000 versus a heat pump at $10,000 to $20,000 is a real gap when the AC is fine. Nobody should go into debt for a heat pump in a cheap-gas state.
When the heat pump wins
- Your central air is dying too. This is the single biggest factor. One machine replaces two, and the capital gap nearly disappears.
- You live where electricity is cheap relative to gas. The Pacific Northwest, the hydro-rich Mountain West, much of the Southeast with mild winters. Washington’s breakeven COP is 2.4, Oregon’s 2.7, both easily reached.
- You heat with oil, propane or baseboards. See the box above. It is not close.
- You want the combustion out of the house. Furnaces are vented and generally safe, but cracked heat exchangers, blocked flues and backdrafting are how furnaces put carbon monoxide in homes. The Consumer Product Safety Commission ties roughly 20 deaths a year to gas furnaces and boilers, and far more injuries. A heat pump removes that risk completely, and if the stove goes electric too, the biggest source of indoor nitrogen dioxide goes with it. We cover the indoor air side in The Winter Indoor Air Problem.
- You care about the carbon. RMI found that replacing a gas furnace with a heat pump cuts emissions in all 48 contiguous states, in the first year and over a 15-year life: about 84 percent in Portland, 91 percent in Seattle, 63 percent in Boston, 35 percent even in coal-heavy Michigan. And the furnace’s emissions are fixed for two decades while the heat pump’s fall every year the grid gets cleaner. US power-sector carbon intensity has dropped about 36 percent since 2007.
- Your state is actually paying. Massachusetts, Maine, Washington and a handful of others make the capital math work even where the fuel math is close.
The compromise: dual fuel
A dual fuel, or hybrid, system pairs a heat pump with a gas furnace. The heat pump handles the mild and moderate hours, which in most climates is the vast majority of the season, and the furnace takes over below a switchover temperature, usually set between 30°F and 40°F. You get efficient heating most of the time, a furnace for the brutal nights, no electric backup strips, and often no panel upgrade.
A March 2026 Northwest Energy Efficiency Alliance study modeled a Portland house at $1,093 a year for a 95 percent furnace plus AC, $842 with a basic heat pump added at a 35°F switchover, and $688 with a heat pump built for efficient low-load running. Dual fuel cut cost and emissions in every case they studied. It is the obvious move when your AC dies and your furnace is young: swap the AC for a heat pump, keep the furnace, set the switchover, done.
The trade-offs are real. You keep gas service and its monthly charge, you keep combustion in the house, and some rebate programs exclude hybrids (Efficiency Maine does; Mass Save allows them with integrated controls). Size the heat pump to about a 30°F balance point and set the switchover a few degrees above it; anything bigger is money spent on capacity you use three nights a year.
Lifespan and upkeep
Gas furnaces last 15 to 20 years. Heat pumps typically last 12 to 15, up to 20 with good care. That sounds like a win for the furnace until you remember the heat pump also replaced your air conditioner, which lasts 10 to 15 years itself and runs the same compressor hours. Compared properly, it is a wash. Both want a professional tune-up once a year at $120 to $250, and filter changes every one to three months. The furnace household pays for two systems’ worth of service; the heat pump household pays for one and carries a small refrigerant-leak risk instead of a heat-exchanger inspection. Call it even and move on.
One installation note from DOE that matters more than brand: the two things most often wrong on heat pump installs are refrigerant charge and airflow. Ask the installer to measure and document both. A great unit installed badly runs like a cheap one.
If you only do three things
- Run the ratio. Electricity in cents per kWh divided by gas in dollars per therm, from your own bills. Under 9, go heat pump. Over 12.5, lean furnace or dual fuel. In between, the AC question decides it.
- Check the AC’s age. If it is within five years of the end, price the heat pump against furnace plus AC, not furnace alone.
- Look up real incentives before you believe a quote. Your utility, your state energy office, then DSIRE. The federal money most articles mention is gone or closed to gas conversions.
Do those three now, in October, while the furnace is still humming along. The February version of this decision is the expensive one!
FAQ
Do heat pumps work below freezing?
Yes. Cold-climate models hold at least 70 percent of their rated heating capacity at 5°F by ENERGY STAR’s definition and run to about minus 13°F. They are the standard heating system in Norway and Maine. The real question is not whether they work but what they cost to run on the coldest days, which is where the COP numbers above come in.
Will a heat pump raise my electric bill?
Yes, and lower your gas bill. Whether the net is positive is the whole point of the table above. In Oregon our model house pays about $860 a year in electricity for heat instead of $970 in gas. In Minnesota it pays $905 in electricity instead of $636 in gas.
Is the 95 percent furnace worth the premium over 80 percent?
On 600 therms a year at national prices, the 95 percent furnace saves about $175 a year in gas for roughly $1,000 to $2,500 more up front, so it pays back in six to fourteen years. DOE’s rule requiring 95 percent furnaces for new installs is currently scheduled for late 2028, though it is tied up in court. Either way, 80 percent furnaces are still legal to buy in 2026.
What about geothermal?
Ground-source heat pumps run at COP 3.5 to 5 year-round because the ground stays about 50°F, which flips the math even in Minnesota. They also cost $20,000 to $40,000 or more installed, and the 30 percent federal credit that made them tempting ended with 2025. A good option for a long-stay house with a yard and a budget; a separate article.
More on running a resilient, lower-cost home: Energy & Bills · How to cut your heating bill for under $100 · The 9 things quietly costing you $1,000 a year · The winter indoor air problem · Our portable power station guide
Sources: U.S. Energy Information Administration (Electric Power Monthly, July 2026 data; Natural Gas Prices by State, 2025; Short-Term Energy Outlook, October 2026; Residential Energy Consumption Survey 2020); U.S. Department of Energy Energy Saver, Air-Source Heat Pumps; ENERGY STAR Key Product Criteria for Air-Source Heat Pumps; IRS, Energy Efficient Home Improvement Credit and FAQs on Public Law 119-21; U.S. DOE Home Energy Rebates guidance, May 2026, as reported by Utility Dive and E&E News; Oregon Department of Energy; Energy Trust of Oregon; Washington State Department of Commerce; Mass Save; Efficiency Maine; Consumer Reports heat pump member survey, July 2026; Northwest Energy Efficiency Alliance, Dual-Fuel Gas Furnace and Heat Pump System Control Analysis, March 2026; RMI, Now Is the Time to Go All In on Heat Pumps, 2023; NREL, Wilson et al., Joule, 2024; Center for Energy and Environment, cold-climate heat pump field study; U.S. Consumer Product Safety Commission, non-fire carbon monoxide deaths, 2022 estimates; Ember, US Electricity 2025. Cost ranges from Consumer Reports, HomeGuide, This Old House, HomeAdvisor and PickHVAC. Figures were checked in October 2026 and will be updated as prices and programs change.