Heat Pump vs Furnace Cost in 2026: The Answer Changes at State Lines

Start with the thing that changed, because it undoes most of the advice currently online: the $2,000 federal heat pump tax credit no longer exists. It ended for anything placed in service after 31 December 2025. The $600 furnace credit went with it.

So has the easy answer. Whether a heat pump beats a gas furnace on running cost flips depending on which state you live in — and it flips in directions that will surprise you. New York and California, the two states most associated with heat pump promotion, are currently two of the worst on running cost at retail rates.

The tax credit, precisely

The credit will not be allowed for any property placed in service after December 31, 2025.

IRS, FAQ on the One Big Beautiful Bill Act modifications, page dated 21 August 2025

That is the operative sentence, from the statute enacted 4 July 2025. Nothing installed in 2026 qualifies for 25C.

Be careful where you check this yourself. The IRS’s own 25C landing page — last updated 28 April 2026 — still carries live-sounding present-tense text about heat pumps qualifying for up to $2,000 and furnaces up to $600, with no expiry banner anywhere on it. That page is stale. Quote the OBBB FAQ instead. We suspect this is precisely why contractors are still including the credit in their savings arithmetic.

One genuine grey area: paying in 2025 does not save you. The credit turns on when equipment is placed in service, not when you paid. The IRS states the parallel rule for the sibling credit explicitly — an expenditure is treated as made when the original installation is completed. If you paid a deposit in December and it went in during February, budget as though you get nothing, and ask a tax preparer.

Rebates still exist, but are closing fast

The IRA rebate programmes were not repealed. HEAR pays up to $8,000 for a cold-climate heat pump, $3,000 for a standard one, $4,000 for an electrical panel, with a $14,000 household cap — 100 per cent of cost under 80 per cent of area median income, 50 per cent between 80 and 150 per cent. The programmes run to 30 September 2031 or until the money runs out.

The catch is that they are administered by states, and several large ones have already shut:

• Colorado: single-family HEAR is closed. Applications after 1 August 2026 “will not be reviewed and will be denied.”
• Georgia: HEAR project submissions “paused until further notice.”
• California: as of 24 February 2026, single-family rebates are “fully reserved statewide” with new requests waitlisted. The HOMES programme has not opened to applications at all.

State utility programmes are often the better bet. Massachusetts’s Mass Save pays $2,650 per ton up to $8,500 for a whole-home installation done during 2026, with income-based support reaching $16,000 or a no-cost turnkey installation. That is live, dated and specific — unlike the federal rebate picture.

Do not accept any quote that includes the federal tax credit in its savings maths, and do not count on an IRA rebate without a confirmed reservation number from your state administrator.

What they cost installed

First, the framing error almost every comparison makes. A heat pump replaces the furnace and the air conditioner. Comparing it to a furnace alone is comparing two different products. The honest comparison is heat pump against furnace plus central AC.

System	Installed cost	Source
95% AFUE gas furnace only	$5,200–$8,800	HomeGuide, 31 Dec 2025
Furnace + 3-ton central AC	roughly $10,000–$18,000	HomeGuide + Fixr, summed
Ducted air-source heat pump (heating and cooling)	average $14,529	EnergySage marketplace quotes, 19 Mar 2026
Ductless mini-split, whole home	average $25,957	EnergySage, 19 Mar 2026
Dual-fuel (heat pump + gas furnace)	$7,500–$12,000	Fixr, 31 Jan 2025

The finding that matters: against furnace plus AC, a ducted heat pump is roughly cost-neutral to modestly cheaper on capital. Against a furnace alone — where you keep an old but working AC — it is clearly more expensive up front.

Two caveats on the ductless figure. EnergySage’s $25,957 average reflects multi-zone whole-home systems with three to five indoor heads, not a single-room install. We could not find a primary-quote source for a single-zone price, so we are not publishing one. And if you have no ductwork at all, the alternative is not a furnace — it is baseboard heat plus window units. Ductless usually wins that comparison decisively.

The state spread on the same marketplace data is enormous: roughly $8,000 in New Mexico and $33,000 in New York. That is almost entirely labour and permitting.

Cost by size — and why you should not use this table to pick equipment

Home size	Furnace BTU	Furnace installed
Up to 1,200 sq ft	40–50k	$3,800–$6,700
1,200–1,600 sq ft	50–60k	$4,200–$7,200
1,600–2,000 sq ft	60–70k	$4,700–$8,000
2,000–2,500 sq ft	70–90k	$5,100–$9,500
2,500–3,000+ sq ft	90–120k	$5,800–$12,000

Now the warning that comes with it. The contractors’ own trade association is blunt about sizing rules of thumb:

Rules of thumb must die. Start with a real load calculation.

Allison Bailes III PhD, ACCA HVAC Blog

ACCA analysed 40 real Manual J calculations. The lowest result was 624 square feet per ton and the average was 1,431 square feet per ton — roughly triple the common “500 square feet per ton” contractor rule. Not one of the forty came in as low as the high end of the typical rule-of-thumb range. Field studies find designs running 20 to 40 per cent oversized.

Use the table to sanity-check a quote’s price. Never use it to pick a tonnage. An oversized heat pump short-cycles, dehumidifies badly, wears its compressor, and — for inverter units specifically — is forced to run at a low modulation ratio where its whole efficiency advantage disappears.

Running costs: the answer flips at state lines

This is the section that actually decides it, and it is where a single national number does the most damage.

The two numbers you need

COP is heat delivered divided by electricity in. COP 3.0 means three units of heat per unit of electricity. It is an instantaneous figure at a stated outdoor temperature, and it falls as temperature falls.

HSPF2 is the seasonal version. Divide it by 3.412 to get seasonal COP: HSPF2 8.1 gives 2.37, HSPF2 11 gives 3.22. Note that SEER2 and HSPF2 replaced SEER and HSPF on 1 January 2023 — the test method changed to a higher static pressure that better reflects real ductwork, so SEER2 numbers are lower than old SEER for the same machine. There is no official conversion factor.

For reference: the federal minimum for split-system heat pumps is 14.3 SEER2 and 7.5 HSPF2. ENERGY STAR’s cold-climate designation requires 8.1 HSPF2 ducted, plus COP at 5°F of at least 1.75 and heating capacity at 5°F of at least 70 per cent of capacity at 47°F.

The arithmetic, shown

Cost to deliver one million BTU of heat:

• Gas furnace: (price per therm × 10) ÷ AFUE
• Heat pump: (price per kWh × 293.07) ÷ COP
• Break-even COP: (cents per kWh × 293.07 × AFUE) ÷ (10 × dollars per therm)

At US averages — 18.56 cents per kWh and $1.479 per therm, against a 95 per cent AFUE furnace — gas delivers heat at $15.57 per million BTU. A heat pump at COP 3.0 costs $18.13. At COP 3.5 it costs $15.54. The national break-even is COP 3.49.

And here is where it stops being a national question

State	Electricity ¢/kWh	Gas $/MMBtu delivered	HP at COP 3.0	Break-even COP
US average	18.56	$15.57	$18.13	3.49
Texas	16.39	$19.71	$16.01	2.44
Louisiana	14.16	$17.64	$13.83	2.35
Massachusetts	30.21	$25.44	$29.51	3.48
Minnesota	15.08	$11.15	$14.73	3.97
California	33.35	$22.34	$32.58	4.37
New York	28.55	$17.84	$27.89	4.69
Idaho	13.01	$7.81	$12.71	4.88
Michigan	21.20	$11.08	$20.71	5.61

A real cold-climate heat pump achieves a seasonal COP of roughly 2.4 to 3.2. Hold that against the right-hand column:

• Texas and Louisiana — break-even under 2.5. The heat pump wins comfortably, and would win even with a mediocre unit.
• Massachusetts and Minnesota — genuinely marginal. A top-tier unit roughly breaks even; a baseline one loses.
• Michigan at 5.61 and Idaho at 4.88 — the heat pump loses on running cost, and it is not close. Cheap Midwestern gas beats it.
• New York at 4.69 and California at 4.37 — the heat pump also loses at current retail rates, despite both states pushing heat pumps hard. This is the finding most likely to surprise you.

Never trust a “heat pumps save $X a year” headline. The sign of the answer changes across state lines.

Three honest caveats. State averages hide utility-level variation of a third or more. Time-of-use and seasonal rate structures change the answer. And a gas fixed monthly customer charge persists if you keep gas for cooking or hot water — it only disappears if you disconnect entirely, which makes a full electrification meaningfully better than the marginal arithmetic suggests. We could not find a sourced national average for that charge, so we are not putting a number on it.

Do they work in the cold? Yes — and here is the real data

The old reputation is obsolete, and for once there is proper field evidence rather than marketing. The US Department of Energy ran a Cold Climate Heat Pump Challenge with eight manufacturers — Bosch, Carrier, Daikin, Johnson Controls, Lennox, Midea, Rheem and Trane. Pacific Northwest National Laboratory published the field results in January 2025, covering 22 units across the US and Canada, monitored for between 10 and 91 weeks.

Measurement	Result
Capacity at 5°F	Close to maximum — near-full heating output
Median COP at 0–5°F	1.9
COP below 30°F	Median range 1.6 to 2.7
Auxiliary heat at 5°F	About 11% of total heating energy
Auxiliary heat at −10 to 0°F	Running about 25% of the time
Observed switchover temperature	30–35°F

Read both halves of that honestly. The capability claim is settled: these machines held near-full capacity at 5°F and kept running below zero. Anyone telling you heat pumps stop working at freezing is either uninformed or selling furnaces.

But a median COP of 1.9 at 0 to 5°F means the heat pump is only about twice as efficient as a resistance heater at those temperatures — and the break-even arithmetic above gets much harsher. Backup heat is genuinely needed below roughly 0°F, and auxiliary contributing 11 to 25 per cent of energy at the coldest hours is normal operation, not a fault.

One limitation PNNL flags itself: many sites had milder-than-normal winters, and only eight of the 22 had ten or more hours below 0°F. The study also did no billing analysis, so it says nothing about cost.

The electrical panel question

This is the most common hidden cost. A heat pump needs a dedicated 240V circuit — typically 30 to 60 amps for the outdoor unit, plus 40 to 60 more if electric backup strips are fitted. A gas furnace needs a 15-amp 120V circuit.

Work	Cost
100A to 200A upgrade	$1,300–$1,600
New 200A service panel	$1,800–$2,500
400A service	$2,000–$4,000
Subpanel	$500–$1,000
Breaker box replacement, national average	$1,475

When it is forced: a 100-amp service already carrying an electric range, electric water heater or EV charger will usually fail the load calculation once you add a heat pump with electric backup. A 100-amp panel with gas range and water heater, paired with a modest heat pump and little or no backup, frequently passes.

The underrated workaround: a heat pump with no electric backup — dual-fuel, or a cold-climate unit paired with your existing gas furnace — often avoids the upgrade entirely. That is a real argument for dual-fuel that rarely gets made. And where HEAR is still open, it pays up to $4,000 toward the panel.

One warning: we could not find sourced figures for utility-side upgrades — service drop, meter base, transformer. Those can add thousands and are the genuine worst case.

How long each one lasts

Equipment	Median service life
Gas or oil furnace	18 years
Air-source heat pump	15 years
Central AC, split or package	15 years

The point most articles miss: the furnace lasts longer individually, but a heat pump replaces two machines. A furnace-plus-AC pair is already on the AC’s 15-year clock for half the system. Over thirty years you buy roughly two heat pumps, versus two air conditioners and about 1.7 furnaces.

On maintenance and repair costs, we are going to disappoint you deliberately. We could not find a single primary or survey-based source for annual service costs, call-out rates, or the price of replacing a compressor, reversing valve, heat exchanger or control board that met our standard. So this section has no dollar figures.

What can be said without numbers: a heat pump runs year-round and so accumulates roughly double the compressor hours of an air conditioner; it has a reversing valve and defrost control that a furnace-plus-AC pair does not; and a gas furnace has a heat exchanger whose cracking is a safety failure with no heat pump equivalent.

The honest verdict, by situation

You have good ductwork

Ducted heat pump is the default. Capital cost is comparable to furnace plus AC. The decision then turns entirely on your state’s price ratio above. One caveat: heat pumps move more air at a lower supply temperature, so ducts sized for a 140°F furnace supply may be undersized. Budget for a duct evaluation.

You have no ductwork

Ductless is the only realistic path and it is expensive. But compare it to the right thing — not a furnace, which would also need ducts, but baseboard heat plus window units. Against that, ductless usually wins decisively.

Cold climate

Technically fine — PNNL confirms it. Economically it depends entirely on your gas price. Minnesota’s break-even of 3.97 and Michigan’s 5.61 mean cheap Midwestern gas wins on running cost. Massachusetts and Maine, with expensive gas and strong state rebates, are the opposite. Dual-fuel is the honest recommendation across most of the cold Midwest: heat pump above about 35°F where COP is high, gas below it.

Mild climate

Heat pump, unambiguously. Texas breaks even at COP 2.44, Louisiana at 2.35 — any compliant unit beats gas. And these homes need air conditioning anyway, so the marginal cost of adding heating capability is close to zero.

Cheap gas and expensive electricity

Michigan, Idaho, much of the Midwest and Mountain West. The heat pump costs more to run. We are going to say so plainly. The case for switching is then about carbon, about avoiding a gas line or flue repair, or about where you think rates are heading — not about your bill next winter.

Your furnace still works

Almost never worth replacing on economics alone. You are writing off remaining life on a machine with an 18-year median, and the annual running-cost difference in most states is a few hundred dollars either way. The exception: if your AC is also near the end, the combined replacement is exactly when the heat pump maths works — because you were going to buy a compressor anyway.

Your furnace is dead but the AC is fine

The hardest case, and where honest advice diverges from heat pump advocacy. You would be scrapping a working AC, or paying for a heat pump and keeping a redundant condenser. If the furnace is dead and the AC is young, a straight furnace replacement is often the rational answer.

You are planning solar

This shifts things decisively toward the heat pump — but only on the right basis. Self-consumed solar displaces retail electricity; exported solar earns the export rate, which under California’s NEM 3.0 and similar successor tariffs is far below retail. Winter heating load peaks when solar output is lowest, so the overlap is poor in cold climates and good in mild ones. We could not verify current export rates, so we are not putting a savings number on this.

What to refuse

• Any quote where the tonnage came from square footage. Ask for the Manual J result in BTU per hour at your design temperature. Refuse “we’ll go up half a ton to be safe.”
• “Heat pumps don’t work in the cold” from someone selling furnaces. PNNL’s 22-home field study settles the capability question. Whether it is cheaper in the cold is a separate question, and often the answer is no — but that is an argument about price, not physics.
• Any 2026 quote that includes the $2,000 federal credit. It does not exist.
• Any rebate promised without a confirmed reservation number from your state administrator.
• A quote that does not name the AHRI-matched model numbers of outdoor unit, indoor coil and air handler, with the SEER2 and HSPF2 of that matched pair rather than the outdoor unit’s headline rating.
• A comparison against a furnace alone when you also need air conditioning.

Questions people actually ask

Is the $2,000 federal credit still available?

No. The IRS is explicit: not allowed for property placed in service after 31 December 2025. The IRS’s own landing page still shows the old amounts with no expiry notice — it is out of date. There is no replacement.

I paid in December 2025 but it was installed in February 2026.

Almost certainly no credit. It turns on when the installation was completed, not when you paid. There is no IRS FAQ on this exact scenario for 25C, so ask a tax preparer — but do not budget for it.

Are there still rebates?

Depends entirely on your state. The federal HEAR programme still exists in statute through 2031, but Colorado has closed, Georgia has paused, and California was fully reserved as of February 2026. State utility programmes like Mass Save are often the better bet.

Will a heat pump lower my bill?

Against a 95 per cent furnace it needs a seasonal COP of about 2.4 to break even in Texas, 3.5 nationally, 4.4 in California, 4.7 in New York and 5.6 in Michigan. Real cold-climate units deliver 2.4 to 3.2. So: yes in the South, roughly a wash in New England, no in most of the Midwest and no in New York or California at current rates.

Do they work below freezing?

Yes. Field-tested units held close to full capacity at 5°F and kept running below zero, with a median COP of 1.9 at 0 to 5°F. Backup supplied about 11 per cent of heating energy at 5°F. They work — they just get less efficient, and you still want backup.

Will I need a panel upgrade?

Often, if you are on 100-amp service with other large electric loads. Budget $1,300 to $1,600 for a 100-to-200 amp upgrade. You can frequently avoid it by going dual-fuel or specifying no electric resistance backup.

Heat pump or dual-fuel?

Dual-fuel if you have a working gas furnace, live where gas is cheap, or want to avoid a panel upgrade. All-electric if you are in a mild climate, if your gas bill carries a large fixed charge you could eliminate by disconnecting, or if you are currently on oil or propane.

How long will it last?

ASHRAE medians: heat pump 15 years, gas furnace 18, central AC 15. The furnace lasts longer individually, but a heat pump replaces both machines — and the AC half of a conventional system is on the same 15-year clock anyway.

What we could not verify

• Maintenance and repair costs for either system. No source met our standard, so this article contains none.
• Single-zone ductless installed cost. The marketplace average reflects multi-zone whole-home systems.
• Cost of adding ductwork to a home that has none, or modifying ducts for heat pump airflow.
• The gas utility fixed monthly customer charge, national average — material to the disconnect-entirely argument.
• Utility-side service upgrade costs beyond the panel itself.
• Current solar export rates under NEM 3.0 and successor tariffs, needed for any quantified solar claim.
• The full current list of states with live federal rebate programmes. The Department of Energy says only “select states” and publishes no list.
• State-level electricity prices came second-hand: we could not render EIA’s state table directly, though the restating source’s US average matched EIA’s own figure exactly.
• The publication date of the ASHRAE life-expectancy chart. Widely used, undated, possibly predating inverter equipment.

The short version

• The $2,000 federal credit is gone for anything installed in 2026. Refuse any quote that still counts it.
• Compare heat pump against furnace plus AC, not furnace alone.
• Work out your own break-even COP from your electricity and gas prices. The national answer is meaningless.
• Texas and the South: yes. Michigan and Idaho: no. New England: marginal. New York and California: no at current rates.
• They work in the cold — near-full capacity at 5°F — but at a COP around 1.9, which is where the economics get hard.
• Demand the Manual J number. Real calculations average three times the square footage rule of thumb.
• Dual-fuel is underrated in the cold Midwest, and often avoids a panel upgrade.
• Check your state rebate before you commit. Several large programmes have already closed.