How the calculator compares costs
A heat pump moves heat instead of making it, so it delivers two to three units of heat for each unit of electricity. Whether that beats a furnace depends on how cold it gets and on the price of power next to the price of your fuel. Here is the math for the default house: 2,000 sq ft in zone 4, heated by an 80% gas furnace, at U.S. average prices.
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1
Estimate the heat the house needs in a year
The house loses about 44,000 BTU/h on a 15°F design day, or 800 BTU/h per degree. × 4,500 heating degree days × 24 hours × 0.6 = 51.8 million BTU of heat a year. This is the same load model as our furnace size calculator.
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2
Price it with your current fuel
51.8 million BTU ÷ 0.80 AFUE = 648 therms. At $1.48 a therm, about $959 a year.
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3
Price it with the heat pump
HSPF2 is BTU of heat per watt-hour over a season. At 7.8: 51,840,000 ÷ 7,800 = 6,646 kWh. At 18.2¢, about $1,210 a year, or $251 more than gas.
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4
Add the cooling savings
A 34,000 BTU/h cooling load run 1,000 full-load hours uses 2,833 kWh with a 12 SEER2 AC and 2,237 kWh at 15.2 SEER2. The 596 kWh saved are worth about $109.
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5
Net it out and find the payback
−$251 + $109 = −$142 a year. In this case the heat pump does not pay for itself on energy. Switch the fuel to propane and it saves about $830 a year, so a $14,500 install pays back in about 17 years, or much sooner if the old AC was due anyway.
Cost per million BTU of heat
This is the fairest way to compare fuels: what you pay for one million BTU actually delivered to the rooms, at U.S. average prices.
| Heat source | Price | Efficiency | $ per million BTU |
|---|---|---|---|
| Natural gas furnace | $1.48/therm | 80% / 96% | $18.50 / $15.42 |
| Heat pump, standard | 18.2¢/kWh | 7.8 HSPF2 (COP 2.3) | $23.33 |
| Heat pump, efficient | 18.2¢/kWh | 10 HSPF2 (COP 2.9) | $18.20 |
| Propane furnace | $2.73/gal | 80% | $37.31 |
| Oil furnace or boiler | $6.23/gal | 80% | $56.25 |
| Baseboard or electric furnace | 18.2¢/kWh | 100% | $53.34 |
Two things jump out. Against propane, oil and baseboard heat, a heat pump costs roughly a half to a third as much to run. Against natural gas at today's prices it is close, and the winner depends on your state. Where power is cheap (Washington, Texas, much of the Southeast) the heat pump tends to win. Where power costs 25¢ or more (New England, California, New York) gas usually stays cheaper to run.
HSPF2, SEER2 and cold weather
Since 2023, heat pumps are rated in HSPF2 for heating and SEER2 for cooling. Divide HSPF2 by 3.412 to get the average COP over a season: 7.8 HSPF2 is a COP of about 2.3. The federal minimum for a new split heat pump is 7.5 HSPF2 and 14.3 SEER2. ENERGY STAR asks for at least 7.8 HSPF2 and 15.2 SEER2.
The HSPF2 rating assumes a moderately cold climate. In a milder one, a heat pump does a little better than its rating. In a colder one it does worse, because it works harder as the outdoor air gets colder and leans on backup heat strips on the worst nights. The calculator adjusts for that:
| Zone | Standard | Cold-climate | Cooling hours |
|---|---|---|---|
| 1–2 | +10% | +10% | 3,000 / 2,200 |
| 3 | +5% | +5% | 1,500 |
| 4 | 0 | 0 | 1,000 |
| 5 | −5% | 0 | 750 |
| 6 | −15% | −7% | 500 |
| 7+ | −25% | −15% | 300 |
These seasonal adjustments are HomeOutlay estimates, not a published standard. Cold-climate models hold their output better. To earn the ENERGY STAR cold-climate label, a heat pump must keep a COP of at least 1.75 at 5°F and at least 70% of its rated heating capacity at that temperature. Many owners in zones 6 and 7 keep the old furnace as backup, a "dual fuel" setup that lets the heat pump carry the mild days.
Rebates and tax credits in 2026
The federal tax credit is gone. The Energy Efficient Home Improvement Credit (tax code section 25C) used to pay 30% of a heat pump's cost, up to $2,000 a year. The 2025 budget law ended it early. The IRS says it covers improvements made through December 31, 2025. A heat pump installed in 2026 does not qualify, even if you signed the contract earlier.
The federal rebate shrank. The Inflation Reduction Act set up a rebate of up to $8,000 for a heat pump for low- and moderate-income households (up to 150% of area median income), paid through state energy offices. DOE Program Notice 26-2, effective May 29, 2026, renamed it the High-Efficiency Electric Home Rebate (HEEHR) and removed rebates for "fuel switching." It now pays only to upgrade existing electric equipment, such as baseboard heat or an old heat pump, to more efficient electric equipment, plus new construction. Homes also need adequate insulation and air sealing first. States had about three months to make the change. Rebates already reserved under the old rules can still be paid.
What remains for most people: utility rebates, which vary widely, some state programs funded outside the federal rebate, and low-interest loans. That is why the calculator starts with $0 in rebates. Look up your utility and your state energy office, then type in what you qualify for.
What a heat pump costs to install
EnergySage's marketplace put the average ducted heat pump at $14,529 before incentives in early 2026, with whole-home jobs ranging from about $8,000 in New Mexico to $33,000 in New York. Trane's 2026 price guide lists outdoor heat pump systems at about $8,300 to $15,600 installed, depending on efficiency. Ductless mini-splits cost more per home when several rooms need heads.
The number that matters for payback is the extra cost. If your AC is 15 years old and due for replacement, a new AC alone would cost $6,500 to $8,500 (Trane's 2026 range). Put that in "You'd spend anyway" and only the difference counts against the savings.
Tips before you switch
- Check your bills first. Your actual therms or gallons from last winter beat any estimate. If they differ a lot from the calculator, adjust the degree days until the fuel use matches.
- Size for heating, not cooling. In cold zones the heating load is bigger. A heat pump sized only for the AC load will lean on backup strips. Ask for a Manual J and the unit's capacity at 5°F.
- Watch the backup heat. Electric strips heat at a COP of 1. Set the thermostat so they come on only when the heat pump can't keep up, not every morning.
- Look at time-of-use rates. Some utilities offer special rates for homes that heat with electricity. Ask before you sign.
- Hire a licensed installer. Refrigerant work requires EPA Section 608 certification, and most areas need a permit for the new circuit.
Sources and assumptions
- Federal credit: IRS, Energy Efficient Home Improvement Credit (page updated April 28, 2026): improvements made through December 31, 2025; heat pumps up to $2,000 a year.
- Federal rebate: DOE Home Energy Rebates Program Notice 26-2, High-Efficiency Electric Home Rebate (HEEHR), effective May 29, 2026. Rebate amounts from Inflation Reduction Act section 50122.
- Electricity prices: EIA Electric Power Monthly, Table 5.6.B, residential average, January to August 2026 (released October 23, 2026). The U.S. default of 18.2¢ matches our other calculators.
- Natural gas: EIA residential price by state, 2025 annual (2024 for CT, ME, MD, NC, RI and SC, where 2025 is not yet out). Propane and heating oil: EIA Heating Oil and Propane Update, residential prices for the week of October 26, 2026 (U.S. $2.73 and $6.23 a gallon, before taxes). States EIA doesn't survey use their regional or the U.S. average.
- Energy content: EIA British thermal units: 100,000 BTU per therm, 91,452 per gallon of propane, 138,500 per gallon of heating oil, 3,412 per kWh.
- Efficiency criteria: ENERGY STAR air-source heat pump key product criteria, including the cold-climate criteria, checked October 2026.
- Installed prices: EnergySage heat pump cost (updated March 19, 2026) and the Trane 2026 HVAC Replacement Cost Guide.
- HomeOutlay assumptions: the heat-loss model, degree days and 0.6 factor of the furnace calculator; the climate adjustments in the table above; cooling loads and full-load hours from our AC size calculator; current fuel compared at your efficiency, other fuels at 80% (100% for electric resistance). Fixed monthly gas charges, maintenance and price changes over time are not included.
Common questions
Is a heat pump cheaper to run than a gas furnace?
Not always. At 2025 U.S. average prices, $1.48 a therm for gas and 18.2 cents a kWh for power, a standard heat pump costs about $250 a year more to heat the calculator's default 2,000 square foot house in zone 4 than an 80% gas furnace. It comes out ahead where gas is pricey or power is cheap, and with a high-efficiency model.
How much can I save by replacing propane or oil heat with a heat pump?
Usually a lot. For the default house in zone 4, heating with propane at $2.73 a gallon costs about $1,930 a year and heating oil at $6.23 a gallon about $2,920, against about $1,210 for a standard heat pump. That is roughly $700 to $1,700 a year before any cooling savings.
Is there a federal tax credit for heat pumps in 2026?
No. The Energy Efficient Home Improvement Credit (section 25C), which paid 30% up to $2,000 for a heat pump, covers only improvements made through December 31, 2025. A heat pump installed in 2026 does not qualify. State, utility and income-based rebates may still apply.
Can I still get the $8,000 heat pump rebate?
Only in some cases. The federal High-Efficiency Electric Home Rebate (formerly HEAR) is run by states, is limited to low- and moderate-income households, and since DOE Program Notice 26-2 (May 29, 2026) no longer pays to replace gas, propane or oil equipment. It can still help replace electric resistance heat or an old heat pump where your state program is open.
Do heat pumps work in cold climates?
Yes, but efficiency drops as it gets colder. Cold-climate models that meet the ENERGY STAR criteria must still deliver a COP of at least 1.75 at 5°F, which is 75% more heat per unit of energy than baseboard heat. Most installs in zones 6 and 7 keep backup heat for the coldest nights.
How long does a heat pump take to pay for itself?
Anywhere from about 5 years to never. It pays back fastest when it replaces propane, oil or baseboard heat and when the old AC needed replacing anyway. Against cheap natural gas, the running savings may be small or negative, so the case rests on replacing the AC and getting cooling and heating in one unit.