Heat Pump vs. Gas Furnace
ROI Calculator

How This Calculator Works

Heat Pump Sizing

Equipment size is calculated using IECC climate zone heating load guidelines: 30 BTU/hr per square foot in warm zones (1–3), 40 BTU/hr per sq ft in moderate zones (4–5), and 50 BTU/hr per sq ft in cold zones (6–7). The raw load is rounded to the nearest 6,000 BTU — a standard equipment increment — and converted to tons (1 ton = 12,000 BTU/hr). These are rule-of-thumb estimates; a Manual J load calculation by a licensed HVAC contractor is the correct method for final equipment selection.

Coefficient of Performance by Climate Zone

A heat pump's efficiency is measured by its coefficient of performance (COP) — units of heat output per unit of electricity input. COP varies with outdoor temperature: the colder it is outside, the harder the heat pump works. This calculator uses climate-zone-average COPs derived from published field performance data: 3.5 for zones 1–3 (mild climates), 2.8 for zones 4–5 (moderate), and 2.2 for zones 6–7 (cold climates, assuming a cold-climate heat pump). These are seasonal averages across the full heating season.

Cold-Climate Heat Pumps

Homes in IECC climate zones 5 and above (most of the northern US) require a cold-climate heat pump (CCHP). Standard heat pumps are rated for operation down to about 17°F and lose significant capacity in severe cold. Cold-climate models maintain heating output to -15°F using enhanced compressor technology. CCHPs cost approximately $1,100 per ton installed versus $800 per ton for standard models. If your ZIP code falls in a cold-climate zone, the calculator automatically uses CCHP assumptions and flags this in the results.

Federal Tax Credits for Heat Pumps (2026 Update)

Federal tax credit eligibility now depends on which type of heat pump you install:

Air-source heat pumps — Section 25C (expired): The Section 25C Energy Efficient Home Improvement Credit expired December 31, 2025 under Public Law 119-21 (the One Big Beautiful Bill Act). Air-source heat pump installations in 2026 and later receive $0 federal credit. This calculator shows no credit for air-source systems.

Geothermal heat pumps — Section 25D (still active): Geothermal (ground-source) heat pump property placed in service through 2032 retains the 30% Section 25D Residential Clean Energy Credit with no dollar cap. A $20,000 geothermal installation would generate a $6,000 credit. The credit is non-refundable — you must have a federal tax liability. See the IRS OBBBA FAQ and consult a tax professional.

Tax-credit rules updated May 2026, reflecting OBBBA Public Law 119-21. Electricity rate data refreshed from EIA. Heat pump performance data sourced from DOE Energy Saver.

Last reviewed: May 2026.

Heat Pumps in 2026 — the Case Without the Federal Credit

Let's start with the thing you may have already heard: the Section 25C Energy Efficient Home Improvement Credit — the federal tax credit that covered 30% of an air-source heat pump's installed cost, up to $2,000 — expired December 31, 2025. Under Public Law 119-21 (the One Big Beautiful Bill Act), that credit does not apply to installations completed in 2026 or later. There is no phase-out, no partial credit, no transition rule for contracts signed in 2025. If your heat pump goes in the ground in 2026, you get zero federal credit on it. See the IRS OBBBA FAQ for the authoritative answer, and talk to a tax professional before assuming anything about your specific situation.

That is a meaningful blow to the economics. A $15,000 air-source heat pump installation used to come with a $2,000 automatic discount from the IRS. That discount is gone. So the honest question is: does a heat pump still make sense in 2026 when you have to pay full price?

For many homeowners, the answer is still yes — and the reason is operating costs, not equipment credits. A heat pump running in a moderate climate can cut your heating bill by 30–50% compared to a gas furnace, and by 60–70% compared to electric resistance baseboard heating. Over a 15-year equipment life, those annual savings compound into numbers that often exceed what the 25C credit was worth. The credit made the math easier. The underlying math still often works without it.

The key word is "often." Whether a heat pump makes financial sense for your home depends on your climate zone, your current fuel type, your local electricity rate, and the cost difference between a heat pump and whatever you'd install instead. This guide walks through each of those factors so you can plug real numbers into the calculator above and get a result that reflects your actual situation.

How Heat Pumps Actually Work — and Why Efficiency Matters

A gas furnace burns fuel. An electric resistance heater converts electricity directly to heat. A heat pump does neither — it moves heat from one place to another, the same way your refrigerator moves heat from inside the box to the kitchen. The DOE Energy Saver guide on heat pump systems has a thorough explanation of the underlying physics. In winter, a heat pump extracts heat energy from outdoor air (or the ground, for geothermal systems) and transfers it inside. This is a genuinely different physical process from combustion or resistance, and it has a profound effect on efficiency.

The efficiency of a heat pump is measured by its Coefficient of Performance (COP): the ratio of heat energy delivered to electrical energy consumed. A COP of 3.0 means the heat pump delivers 3 units of heat for every 1 unit of electricity it uses. In practical terms, this means 300% efficiency — three times more effective than electric resistance heating, which by definition operates at 100% efficiency (every watt of electricity becomes a watt of heat, no more). Gas furnaces are measured differently, using Annual Fuel Utilization Efficiency (AFUE). A 95% AFUE furnace converts 95% of the gas it burns into usable heat. That's good, but it's not comparable to a heat pump's COP of 2.5 or higher.

The reason COP matters so much is that electricity and natural gas have different costs per unit of heat. In most of the US, electricity costs more per BTU than natural gas. At current national averages — roughly $0.17/kWh for electricity and $12/MMBtu for natural gas — electricity costs about twice as much per BTU of raw energy. But a heat pump with a COP of 2.5 uses 60% fewer BTUs of electricity to produce the same amount of heat. That efficiency advantage is large enough to close the price-per-BTU gap, and often to beat natural gas on operating cost. In regions with cheap electricity (the Pacific Northwest, parts of the Southeast) or expensive gas (New England, California), heat pumps win by a wider margin. In regions with cheap gas and expensive electricity (parts of the Midwest and Mountain West), the economics get tighter or favor gas.

Standard vs. Cold-Climate Heat Pumps — This Matters More Than Brand

The single most consequential decision in choosing a heat pump for a northern home has nothing to do with brand name or SEER rating. It is whether you buy a standard air-source heat pump or a cold-climate heat pump (CCHP). These are not marketing categories. They are fundamentally different product specifications.

A standard air-source heat pump is designed to operate efficiently between about 17°F and 95°F. Below that lower threshold, it struggles — output capacity drops sharply, and at -5°F or colder, a conventional heat pump provides essentially no useful heating. Most standard units automatically switch to electric resistance backup strips at low temperatures, which is warm but expensive. If you live somewhere that regularly hits single digits in January, a standard heat pump is not a viable primary heating system. It will keep you from freezing, but your electric bill will be painful.

Cold-climate heat pumps use different compressor technology — variable-speed compressors with enhanced vapor injection — to maintain heating output at temperatures as low as -13°F to -22°F depending on the model. The Mitsubishi Hyper Heat line, Bosch IDS 2.0, Daikin Fit, and several other products in this category are legitimately usable as primary heating sources in IECC climate zones 5, 6, and 7, which covers most of New England, the upper Midwest, the Great Plains, and the mountain West. They cost approximately 30–40% more per installed ton than standard models, but they perform reliably in weather that would leave a standard heat pump limping.

For climate zones 1 through 3 — roughly the South, Southeast, and Southwest — standard heat pumps work perfectly well. Winter temperatures rarely challenge them, and the efficiency advantage over gas is most pronounced in mild climates where the COP stays high all winter. If you're in Houston, Atlanta, or Phoenix, a standard heat pump is the right call. If you're in Minneapolis, Buffalo, or Denver, a cold-climate model is not optional.

On sizing: the HVAC industry has a persistent problem with oversizing. Contractors sometimes install bigger equipment than a home needs because it avoids callbacks in extreme weather and because bigger units generate more margin. An oversized heat pump short-cycles — it reaches setpoint quickly, shuts off, and restarts repeatedly — and this is bad for efficiency and equipment life. The correct way to size any heating system is a Manual J load calculation, which accounts for your home's insulation, windows, ceiling height, infiltration rate, and local design temperatures. The rule-of-thumb figure used in this calculator (30–50 BTU/hr per square foot by climate zone) is a reasonable starting point for the calculator's estimates, but you should not use it to make a final equipment purchase. Get a Manual J from a contractor who will show you the numbers.

The Real Operating Cost Comparison

Operating cost is where heat pumps either win or lose the argument. Let's work through the math with a concrete example. Assume a home in climate zone 5 that requires 80 MMBtu of heat per year — a reasonable figure for a 2,000 square foot house in the upper Midwest.

A natural gas furnace at 95% AFUE needs to burn 84.2 MMBtu of gas to deliver 80 MMBtu of usable heat. At a delivered gas price of $12 per MMBtu (close to current national average for residential customers), that's about $1,010 per year. A heat pump with a seasonal COP of 2.2 (appropriate for zone 5 with a cold-climate model) needs to consume 80 MMBtu ÷ 2.2 = 36.4 MMBtu of electricity to deliver the same heat. Converting: 36.4 MMBtu × 293.1 kWh/MMBtu = 10,669 kWh. At $0.15/kWh, that's $1,600 per year. Gas wins in this scenario.

Change the electricity rate to $0.12/kWh — common in the Southeast and Pacific Northwest — and the heat pump costs $1,280 per year. Still more than gas, but the gap is smaller. Change the scenario to a propane furnace at 95% AFUE with propane at $3.50/gallon ($35/MMBtu), and the furnace costs about $3,090 per year for the same 80 MMBtu. The heat pump at $1,600 saves $1,490 per year. At $0.12/kWh, it saves $1,810 per year. A $15,000 heat pump installation pays back in 8–10 years on operating savings alone.

The pattern is consistent: heat pumps win decisively over propane and oil, win moderately over electric resistance, and trade blows with natural gas depending on your local rates. At current national averages, natural gas has an operating cost edge in cold climates. In mild climates (zones 1–3), the heat pump's higher COP (3.0–3.5) closes the gap enough that it's often competitive with even cheap gas. Enter your actual utility rates in the calculator above — the difference between $0.12/kWh and $0.20/kWh matters enormously to this calculation.

State and Utility Rebates That Survived OBBBA

The 25C credit is gone at the federal level for air-source heat pumps, but the rebate landscape at the state and utility level remains substantial. Several funding streams that are entirely separate from Section 25C are still active and in some cases actively distributing money.

Utility rebates are the most accessible. Many electric utilities offer $300–$1,500 for customers who install ENERGY STAR certified heat pumps, because displacing a gas furnace or electric resistance heater with a more efficient unit reduces peak load on the grid. These rebates don't require a federal credit to exist — they're funded by the utility itself, often through ratepayer-funded efficiency programs that state regulators require. Call your electric utility or check their website before getting quotes. Some utilities also offer low-interest financing for efficiency upgrades.

At the state level, Massachusetts, New York, Colorado, Minnesota, Maine, and several other states have independent heat pump incentive programs funded through state efficiency charges or state appropriations. These vary widely in amount and eligibility — some are income-targeted, some are open to all homeowners, some are first-come-first-served and run out mid-year. The IRA-funded HOMES Rebate Program and HEEHRA program are separate from Section 25C and were administered through state energy offices; depending on your state's implementation status, some of these funds may still be available. Check DSIRE (dsireusa.org) for a current state-by-state database of incentives. Program availability changes frequently, and what was true six months ago may not be true today.

One federal credit that did survive OBBBA for heat pumps: geothermal (ground-source) heat pumps retain the 30% Section 25D Residential Clean Energy Credit through 2032, with no dollar cap. If you're in a position to consider geothermal — typically $20,000– $40,000 installed, depending on lot size and geology — the 30% credit makes a meaningful difference in the economics. This calculator handles geothermal separately.

When a Heat Pump Is the Right Choice

There are situations where the case for a heat pump is strong enough that you would regret not choosing one, and situations where a gas furnace is the practical answer. Here is a plain-language assessment of each.

Heat pumps make the most compelling case when you are currently heating with electric resistance, propane, or heating oil. If your current heating bill reflects propane at $3.50/gallon or oil at $4.50/gallon, switching to a heat pump — even with no federal credit — delivers operating savings large enough to justify the upfront cost in most climate zones. The payback periods in these scenarios are often 5–10 years, and you have 15–20 years of expected equipment life ahead. A heat pump also makes strong sense in new construction, where you are choosing from scratch and all-electric systems avoid the cost of running gas lines, adding a combustion appliance, and dealing with gas utility connection fees.

Heat pumps in moderate climates — zones 2 through 4, covering the mid-Atlantic, the Carolinas, the mid-South, and much of the West — are generally a sound choice even against natural gas. The milder winters keep the heat pump's COP high enough that operating costs are competitive, and you also get air conditioning from the same unit, which simplifies your mechanical system.

Heat pumps are harder to justify when you have an existing high-efficiency gas furnace that still has years of service life ahead of it, you live in a very cold climate with cheap gas, and your electricity rate is on the high side. Replacing a working 96% AFUE furnace that will last another 10 years with a $15,000 heat pump, in a zone 6 market where gas is $9/MMBtu and electricity is $0.18/kWh, is a hard investment to defend on pure economics. You might still do it for other reasons — electrification goals, air quality, avoiding gas line maintenance — but the financial case is thin.

Homes without existing ductwork face a different calculus. Installing a central ducted heat pump in a home that has never had ducts adds $3,000–$8,000 to the project cost. Ductless mini-split systems are the practical alternative — they work well and avoid the duct cost, but each room or zone requires its own indoor unit, and aesthetics can be a consideration. Mini-splits are increasingly common and the technology is mature, but they require more planning than a drop-in furnace replacement.

The calculator above handles all of these scenarios. Enter your home's square footage, your current fuel type, your ZIP code, and your annual heating cost, and you'll see a side-by-side cost comparison that reflects your climate zone, appropriate equipment sizing, and the correct federal credit status (zero for air-source, 30% for geothermal). The results are estimates based on published performance data and national cost averages — your contractor's quotes will be the final number — but they will tell you whether the conversation is worth having.