The short answer
- At U.S. average prices (October 2026), a 95% gas furnace delivers heat for about $15.60 per million Btu. A heat pump has to average a COP of about 3.4 to match it, so against cheap natural gas the heating bill is often close to a tie.
- Against propane ($31 per million Btu), heating oil ($53) or electric baseboard ($53), a heat pump averaging COP 2.5 ($21) cuts the heating bill by roughly a third to 60%.
- Cold-climate heat pumps on the NEEP list still deliver a COP of at least 1.75 at 5°F. They work in Minnesota and Maine, not just Georgia.
- Upfront, a furnace replacement averages about $4,800, while a ducted heat pump commonly costs $14,500 to $23,000 installed. If your AC is also due, compare against furnace plus AC.
- The federal 25C tax credit (up to $2,000) ended for systems installed after December 31, 2025. State and utility rebates are what is left.
How each one makes heat
A furnace burns natural gas, propane or heating oil, or runs electric coils, and blows the warm air through your ducts. Its efficiency is rated in AFUE (annual fuel utilization efficiency): the share of the fuel's energy that ends up as heat in the house over a season. The federal minimum for a new indoor gas furnace is 80% AFUE. Condensing furnaces reach 95% to 98%. Under the current federal rule, new indoor gas furnaces made on or after December 18, 2028 must reach 95%. No furnace can beat 100%, and an electric furnace or baseboard heater sits at exactly 100%.
A heat pump is an air conditioner that can also run in reverse. In winter it pulls heat out of the outdoor air (20°F air still holds plenty of heat), concentrates it with a compressor and releases it indoors. Because it moves heat instead of making it, it delivers more heat than the electricity it uses. That ratio is the coefficient of performance (COP). A COP of 3 means 3 kWh of heat for every 1 kWh of electricity, or 300% efficiency.
COP falls as the outdoor temperature drops, so heat pumps carry a seasonal rating instead: HSPF2, the Btu of heat delivered per watt-hour of electricity over a test heating season based on a moderate climate. Divide HSPF2 by 3.412 to turn it into an average seasonal COP.
| Equipment | Rating | Heat per unit of energy |
|---|---|---|
| Standard gas furnace (federal minimum) | 80% AFUE | 0.80 |
| Condensing gas furnace | 95% to 98% AFUE | 0.95 to 0.98 |
| Electric furnace or baseboard | 100% | 1.0 |
| Split heat pump, federal minimum | 7.5 HSPF2 | about 2.2 (seasonal) |
| Cold-climate ducted heat pump (NEEP list minimum) | 7.7 HSPF2, COP 1.75 at 5°F | about 2.3 (seasonal) |
| Cold-climate ductless heat pump (NEEP list minimum) | 8.5 HSPF2, COP 1.75 at 5°F | about 2.5 (seasonal) |
The HSPF2 test assumes a moderate winter. In a cold climate the real season average comes in lower; in a mild one, higher.
The math: cost per million Btu of heat
To compare fuels fairly, put every option on the same footing: what it costs to deliver one million Btu (MMBtu) of heat into the house. One MMBtu is 10 therms.
Cost per MMBtu of heat = fuel price ÷ MMBtu per unit of fuel ÷ efficiency (AFUE or COP)
The energy in each unit of fuel comes from the EIA: natural gas has about 1,036 Btu per cubic foot (1.036 MMBtu per thousand cubic feet, or Mcf), propane 91,452 Btu per gallon, heating oil 138,500 Btu per gallon, and one kWh of electricity is 3,412 Btu. So one MMBtu equals about 293 kWh.
For prices we use the latest EIA figures: natural gas averaged $15.34 per Mcf for homes in 2025 (about $1.48 per therm), residential propane was $2.73 a gallon and heating oil $6.23 a gallon in the week of October 26, 2026 (before taxes), and electricity averaged 18.16 cents per kWh in August 2026, the same rate our electric bill calculator uses.
Worked example: gas furnace vs. heat pump
- Gas, 95% furnace: $15.34 ÷ 1.036 = $14.81 per MMBtu of gas. Divide by 0.95 and you pay $15.59 per MMBtu of heat.
- Heat pump, seasonal COP 2.5: 293 kWh × $0.1816 = $53.22 per MMBtu of electricity. Divide by 2.5 and you pay $21.29 per MMBtu of heat.
The table runs the same math for every common system. The last column prices a house that needs 50 MMBtu of heat a season, a round example number for a mid-size home in a cold-winter state.
| System | Fuel price used | Per MMBtu of heat | 50 MMBtu season |
|---|---|---|---|
| Gas furnace, 95% AFUE | $1.48/therm | $15.59 | $779 |
| Heat pump, seasonal COP 3.5 | 18.16¢/kWh | $15.21 | $760 |
| Heat pump, seasonal COP 3.0 | 18.16¢/kWh | $17.74 | $887 |
| Gas furnace, 80% AFUE | $1.48/therm | $18.51 | $925 |
| Heat pump, seasonal COP 2.5 | 18.16¢/kWh | $21.29 | $1,064 |
| Heat pump, seasonal COP 2.0 | 18.16¢/kWh | $26.61 | $1,331 |
| Propane furnace, 95% AFUE | $2.73/gal | $31.42 | $1,571 |
| Oil furnace or boiler, 85% | $6.23/gal | $52.92 | $2,646 |
| Electric furnace or baseboard | 18.16¢/kWh | $53.22 | $2,661 |
How to find your own heat load: add up the therms on last winter's gas bills, subtract a summer month's use times the number of winter months (that is water heating and cooking), and multiply by your furnace's AFUE. For example, 600 therms of heating at 80% AFUE is 480 therms, or 48 MMBtu, of heat. For propane, multiply gallons by 0.0915 and by the AFUE. For oil, multiply gallons by 0.1385 and by the efficiency.
The break-even COP: the one number that decides it
A heat pump costs less to run than a furnace whenever its COP is higher than this:
Break-even COP = (electric price per kWh × 293) ÷ (furnace cost per MMBtu of heat)
At the U.S. average prices above:
- vs. a 95% gas furnace: $53.22 ÷ $15.59 = 3.4. The heat pump has to average better than 3.4 to win. Modern variable-speed units do that in mild weather, not on cold nights. Against cheap gas, the heating bill is close to a tie.
- vs. an 80% gas furnace: 2.9. A good heat pump wins in a mild or mixed climate.
- vs. propane at 95%: 1.7. Almost any heat pump wins, and a cold-climate model wins even at 5°F.
- vs. heating oil or electric resistance: about 1.0. A heat pump always wins.
Because gas and electric rates vary so much by state, the same heat pump can be a clear win in one place and a loss in another. This table shows the break-even COP against a 95% gas furnace at different local prices:
| Electricity | Gas $1.00/therm | Gas $1.20/therm | Gas $1.48/therm | Gas $2.00/therm |
|---|---|---|---|---|
| 12¢/kWh | 3.3 | 2.8 | 2.3 | 1.7 |
| 15¢/kWh | 4.2 | 3.5 | 2.8 | 2.1 |
| 18.16¢/kWh | 5.1 | 4.2 | 3.4 | 2.5 |
| 22¢/kWh | 6.1 | 5.1 | 4.1 | 3.1 |
| 30¢/kWh | 8.4 | 7.0 | 5.6 | 4.2 |
Use your winter electric rate, not a summer one. Many utilities charge less per kWh in winter, and some offer a lower rate for electric heat. Check whether your bill has a fixed monthly gas charge, too: if a heat pump lets you close the gas account entirely, that charge disappears.
What it costs to heat a home, by climate
Here are three example homes. The heat loads and seasonal COPs are illustrations, not measurements; we lower the COP as winters get colder because the heat pump spends more hours in cold air. Prices are the U.S. averages above.
| Example home | Heat needed | Gas 95% | Heat pump | Propane 95% | Oil 85% | Electric resistance |
|---|---|---|---|---|---|---|
| Mild winter | 25 MMBtu | $390 | $443 (COP 3.0) | $786 | $1,323 | $1,330 |
| Mixed climate | 45 MMBtu | $702 | $958 (COP 2.5) | $1,414 | $2,381 | $2,395 |
| Cold winter | 75 MMBtu | $1,169 | $1,996 (COP 2.0) | $2,356 | $3,969 | $3,992 |
The table leaves out cooling. A heat pump is also your air conditioner, and a new one at 15 or more SEER2 uses less power than an aging central AC.
Cold-climate heat pumps
Older heat pumps earned a reputation for blowing lukewarm air and giving up near freezing. Variable-speed (inverter) compressors changed that. The Northeast Energy Efficiency Partnerships (NEEP) keeps a list of models that qualify as cold-climate heat pumps under its specification, version 4.0, effective January 1, 2023. To be listed, a system must:
- have a variable-capacity compressor (three or more speeds, or continuously variable);
- deliver a COP of at least 1.75 at 5°F at maximum capacity, which is 75% more heat than a baseboard heater from the same electricity;
- rate at least 7.7 HSPF2 and 14.3 SEER2 if ducted, or 8.5 HSPF2 and 15 SEER2 if ductless;
- report its capacity at 5°F, 17°F and 47°F.
Efficiency at 5°F is only half the story. The bigger question is capacity: how many Btu per hour the unit still puts out at your design temperature, the cold-night temperature your heating system is sized for. A unit rated at 36,000 Btu/h at 47°F may deliver far less at 0°F. Look the model up on the NEEP list and compare its 5°F capacity with your heat loss from a Manual J calculation.
Most ducted heat pumps also have backup electric heat strips. They run at COP 1, so every hour on strips costs as much as baseboard heat. A good design keeps strip use to the coldest few nights and the defrost cycles, when the outdoor coil briefly reverses to melt frost. Set the outdoor unit on a stand above your typical snow depth and keep it clear.
Hybrid (dual-fuel) systems
A hybrid system pairs a heat pump with a gas or propane furnace on the same ducts. The heat pump handles mild weather. Below a switchover temperature, the thermostat locks it out and runs the furnace.
The cheapest switchover point is the outdoor temperature where your heat pump's COP drops below the break-even COP from the section above. Against a 95% gas furnace at average prices (break-even 3.4), the heat pump should only run in fairly mild weather. Against propane (1.7), it can carry the house down into single digits. Ask your installer for the COP of the exact model at 17°F and 47°F; the NEEP list also shows it.
A hybrid makes the most sense when:
- your furnace still has years left but the air conditioner is dying, so you put a heat pump where the AC was;
- you heat with propane, where the heat pump saves a lot most of the winter;
- your winters are very cold and a heat pump sized for the coldest night would be large and expensive;
Upfront cost
Installed prices vary more by region, house and contractor than by brand. These are the best national figures we found:
| System | Typical installed cost | Source |
|---|---|---|
| Furnace replacement (all fuels) | $2,800 to $7,500, average $4,800 | Fixr, January 2026 |
| Natural gas furnace | $3,800 to $10,000 | Fixr, January 2026 |
| Central AC, 3 tons, on existing ducts | $3,000 to $6,500 | PickHVAC, June 2025 |
| Ducted heat pump, whole home | $14,529 average before incentives | EnergySage, March 2026 |
| Ducted heat pump, 1,500 to 2,500 sq ft home | $17,000 to $23,000, median $19,500 | Rewiring America |
| Ductless mini-split, one zone | $5,400 to $8,500, median $6,600 | Rewiring America |
| Ductless mini-splits, whole home | $25,957 average before incentives | EnergySage, March 2026 |
The fair comparison is not always heat pump vs. furnace. If your air conditioner is also near the end, compare a heat pump with furnace plus AC, which by the ranges above runs roughly $5,800 to $14,000. If you have no ducts, a ductless system avoids the cost of new ductwork.
Ask about hidden costs: a panel upgrade for the backup heat circuits, new refrigerant lines, duct repairs and permits. Fixr puts typical furnace life at 15 to 20 years. A heat pump runs summer and winter, so plan its replacement more like a central AC's.
Tax credits and rebates in 2026
The federal tax credit is gone for new installs. The Energy Efficient Home Improvement Credit (tax code section 25C) paid 30% of the cost of a qualifying heat pump or heat pump water heater, up to $2,000 a year, and up to $600 for an efficient gas furnace. The 2025 budget law ended it early. The IRS says the credit is available for improvements made through December 31, 2025. If your system was installed and running by then, claim it on your 2025 return with Form 5695. A system installed in 2026 gets no federal credit.
State Home Energy Rebates (HOMES and HEAR) come from the 2022 Inflation Reduction Act and are run by each state. The Department of Energy lists up to $8,000 under HOMES for whole-home projects that save at least 20%, and up to $14,000 under HEAR for income-qualified households buying efficient electric equipment. They are only open in some states, and the rules changed this year: after new DOE guidance issued May 29, 2026, North Carolina's program says HEAR rebates no longer cover replacing gas or other fossil-fuel equipment, only electric-to-electric upgrades such as baseboard to heat pump. Check with your state energy office before you count on a rebate.
Utility rebates are often the easiest money: many utilities pay for heat pumps, cold-climate models or smart thermostats. ENERGY STAR's Rebate Finder searches by ZIP code. Most rebates require pre-approval or a listed contractor, so apply before you sign.
Pros and cons
Heat pump
- Heats and cools with one system
- Far cheaper to run than propane, oil or electric resistance
- Even, quiet heat from variable-speed models
- No combustion in the house, so no carbon monoxide risk from the heater
- Can close the gas account and its fixed monthly fee
Gas furnace
- Lower upfront cost, especially if the AC is fine
- Often cheapest to run where gas is cheap and power is pricey
- Hot air at full output on the coldest night
- Long life, typically 15 to 20 years
- Needs venting, a gas line and a working CO alarm
Common mistakes
- Comparing the wrong things. A heat pump replaces the furnace and the AC. If the AC is old, price both together.
- Using the 47°F COP. Brochures quote COP 4 or more at 47°F. Your season average will be lower. Use HSPF2 ÷ 3.412, and less in a cold climate.
- Sizing by square feet. A rule of thumb can miss by a ton or more. Ask for a Manual J load calculation; oversized equipment short-cycles and undersized equipment leans on strip heat.
- Deep thermostat setbacks with a heat pump. A big morning recovery can trigger the backup strips. Small setbacks, or a thermostat with heat pump recovery logic, work better.
- Ignoring the ducts. ENERGY STAR says sealing and insulating ducts can improve heating and cooling efficiency by as much as 20%. Fix leaky ducts before you buy a bigger system.
When to call a pro
Installing either system is a job for a licensed HVAC contractor. Handling refrigerant requires EPA Section 608 certification. Gas piping and furnace venting affect carbon monoxide safety, and most places require a permit and inspection. The electrical side, new 240-volt circuits or a panel upgrade, should be done by a licensed electrician. Ask each bidder for:
- a Manual J heat loss and gain report for your house, not a square-foot guess;
- the AHRI certificate number of the exact outdoor and indoor combination;
- the heat pump's capacity and COP at 5°F and 17°F, and how much backup heat is included;
- for a hybrid, the switchover temperature they plan to set and why.
To see how heating fits into the rest of your bill, try the electric bill calculator. If you also need to size cooling for a room, use the AC size calculator. If you plan solar panels to offset the extra electricity, the solar payback calculator shows the payoff. For more ways to cut your power use, read how to lower your electric bill.
Common questions
Is a heat pump cheaper to run than a gas furnace?
It depends on your local prices. At October 2026 U.S. averages, a 95% gas furnace makes heat for about $15.60 per million Btu, and a heat pump needs a seasonal COP of about 3.4 to match it. Most heat pumps average 2 to 3.5 over a season, so against natural gas the bill can go either way. Against propane, oil or electric baseboard, the heat pump almost always wins.
Do heat pumps work in cold climates?
Yes, if you buy a cold-climate model. The NEEP specification requires a COP of at least 1.75 at 5°F, which is 75% more heat than a baseboard heater from the same electricity. Size it to your design temperature with a Manual J calculation and keep backup heat for the coldest nights.
How much does a heat pump cost compared to a furnace?
A furnace replacement averages about $4,800, according to Fixr's 2026 data. A whole-home ducted heat pump commonly costs $14,500 to $23,000 installed, and a single-zone ductless mini-split about $5,400 to $8,500. A heat pump also replaces your central air conditioner, so compare it with furnace plus AC if both are old.
Is there still a federal tax credit for heat pumps in 2026?
No. The 25C Energy Efficient Home Improvement Credit, worth up to $2,000 for a heat pump, only covers improvements made through December 31, 2025. Check your state energy office for Home Energy Rebates and your utility for local rebates before you sign a contract.
What is a hybrid or dual-fuel heat pump system?
It pairs a heat pump with a gas or propane furnace on the same ducts. The heat pump handles mild weather and the furnace takes over below a switchover temperature. It suits homes with a furnace that still has years left, propane heat or very cold winters.
What is a good HSPF2 rating for a heat pump?
The federal minimum for a split heat pump is 7.5 HSPF2. The NEEP cold-climate list starts at 7.7 for ducted and 8.5 for ductless systems. Divide HSPF2 by 3.412 to get the average seasonal COP: 8.5 HSPF2 works out to about 2.5.
Sources
Prices and figures were checked in October 2026. Fuel and electricity prices change monthly; use your own bills for a decision.
- EIA, U.S. price of natural gas delivered to residential consumers, annual, 2025 average $15.34 per Mcf (released September 30, 2026)
- EIA, Weekly Heating Oil and Propane Prices, U.S. residential propane $2.73 and heating oil $6.23 per gallon, week of October 26, 2026, excluding taxes
- EIA, Electric Power Monthly, Table 5.6.A, U.S. residential average 18.16¢ per kWh, August 2026
- EIA, British thermal units (Btu), heat content of natural gas, propane, heating oil and electricity
- 10 CFR 430.32, federal energy conservation standards, furnace AFUE and heat pump HSPF2 minimums, checked October 2026
- NEEP, Cold Climate Air Source Heat Pump Specification, version 4.0, effective January 1, 2023, and the NEEP product list
- ENERGY STAR, Air-Source Heat Pumps, cold-climate testing to 5°F, checked October 2026
- ENERGY STAR, Heating and Cooling, duct sealing can improve efficiency by as much as 20%
- IRS, Energy Efficient Home Improvement Credit, page updated April 28, 2026
- U.S. Department of Energy, Home Energy Rebates programs, checked October 2026
- North Carolina DEQ, Energy Saver NC program changes, DOE guidance of May 29, 2026
- EnergySage, heat pump costs, updated March 19, 2026; marketplace quotes, mostly Massachusetts
- Rewiring America, heat pump costs, 20th to 80th percentile installed prices, checked October 2026
- Fixr, furnace replacement cost, updated January 28, 2026
- Central AC installed cost: PickHVAC replacement cost guide (June 2025), as used in our AC size calculator.