Home heating choices in 2026 face a real inflection point. Heat pumps have gone from niche to mainstream, federal and state rebates cover thousands of dollars of the installation cost, and the efficiency gap over gas furnaces has widened with the latest variable-speed inverter units. Yet gas furnaces still dominate new installs in much of the country because the upfront cost is lower and gas prices in some regions are very low. This guide explains the real economics of each system, the climate considerations, and how to choose.
How a gas furnace works
A gas furnace burns natural gas (or propane in rural areas) in a sealed combustion chamber. A heat exchanger transfers the combustion heat to air, which a blower fan circulates through the home’s ductwork. Combustion byproducts (mostly water vapor and CO2) vent outside through a flue pipe.
Modern condensing furnaces extract more heat from the exhaust by cooling it below the dew point and condensing the water vapor. AFUE ratings indicate how much of the fuel energy becomes useful heat. 80 percent AFUE is a basic furnace. 90 to 95 percent AFUE is a condensing furnace. 96 to 98 percent AFUE is a high-end modulating condensing furnace.
Gas furnaces respond fast. Cold start to full output takes 30 to 60 seconds. The output temperature is high (typically 50 to 65 degrees Celsius at the supply vent), so the home feels warm quickly. The system runs in cycles, on for several minutes and off for several minutes, with variable-speed models modulating in between.
How a heat pump works
A heat pump is an air conditioner that can run in reverse. Refrigerant cycles between an outdoor coil and an indoor coil. In summer, the indoor coil absorbs heat from indoor air and dumps it outside (cooling). In winter, the cycle reverses. The outdoor coil absorbs heat from outdoor air and dumps it inside (heating).
This sounds impossible (extracting heat from cold air) but it works because heat moves from any warmer body to any colder body. Even minus 10 degree Celsius air contains heat relative to even colder refrigerant. The heat pump just needs to keep the refrigerant cold enough to absorb heat from the outdoor air.
Heat pump efficiency is rated by HSPF2 (Heating Seasonal Performance Factor) in the US and SCOP in Europe. Modern units rate HSPF2 8 to 11 (SCOP 3.8 to 5.0). The number represents the ratio of heat delivered to electrical energy consumed. HSPF2 9 means you get 9 BTU of heat for every BTU of electricity, or 2.6 to 1 in heat-to-electricity terms.
Output air is cooler than a gas furnace. A heat pump supplies air at 30 to 40 degrees Celsius, versus 50 to 65 for a furnace. The room warms more slowly but reaches the same setpoint. People accustomed to furnace heat sometimes complain that heat pump air feels cold, but the room temperature is identical.
The efficiency comparison
A 95 percent AFUE gas furnace converts 95 percent of the gas energy to heat. The other 5 percent goes up the flue.
A HSPF2 9 heat pump delivers 264 percent of its electrical input as heat. This is not impossible. The remaining heat comes from the outdoor air, not from the electricity itself. The electricity just runs the compressor that moves the heat.
In raw energy terms, the heat pump is 3 to 4 times more efficient. The question is the cost per unit of energy. Gas in the US averages 1.20 to 1.50 dollars per therm (100000 BTU). Electricity averages 0.13 to 0.18 dollars per kWh (3412 BTU).
Per million BTU of delivered heat:
Gas furnace at 95 AFUE: 1 million BTU divided by (0.95 efficiency times 100000 BTU per therm) equals 10.5 therms. At 1.30 per therm, that costs 13.65.
Heat pump at HSPF2 9: 1 million BTU divided by 2640 BTU per kWh equals 379 kWh. At 0.15 per kWh, that costs 56.85.
Wait, the heat pump costs more? In this scenario, yes. The math depends heavily on local prices. In high-electricity markets like New England or California, gas can win on operating cost. In low-electricity markets with moderate gas prices (most of the Pacific Northwest, parts of the Southeast), heat pumps win clearly.
Run your own numbers with your local rates. The DOE rate comparison tool and your last utility bills give the inputs.
Climate matters
Cold-climate heat pumps (Mitsubishi Hyper-Heat, Fujitsu Halcyon, Carrier Infinity, Daikin Aurora, Bosch IDS Plus, Mr Cool Universal) maintain full capacity to minus 15 Celsius. Standard heat pumps lose capacity rapidly below freezing.
In Climate Zone 5 and below (Boston, Chicago, Minneapolis, Denver), use a cold-climate heat pump or a dual-fuel hybrid with gas backup. In Zone 6 and 7 (Duluth, Fargo, Anchorage), dual-fuel is usually the right answer, with gas handling the coldest 5 to 10 percent of hours and the heat pump handling the rest.
In Zones 3 and 4 (Atlanta, Nashville, Charlotte, Portland OR), a standard heat pump handles the full heating load without backup. These are the markets where heat pumps win unambiguously on both cost and comfort.
In Zone 1 and 2 (Miami, Houston, Phoenix), heating is a minor load and a basic heat pump or air handler with resistance backup is plenty.
Installation cost differences
A direct gas furnace replacement on existing ductwork runs 3500 to 6500 dollars including the new furnace and labor. A central heat pump replacement on existing ductwork runs 6500 to 11000 dollars. A new ductless mini-split installation (no existing ductwork) runs 3500 to 6000 dollars per zone.
Federal rebates under the Inflation Reduction Act cover up to 8000 dollars for heat pump installations for qualifying income brackets. State and utility rebates stack on top. In some states, the net out-of-pocket for a heat pump installation is similar to a gas furnace replacement.
Check DSIRE (Database of State Incentives for Renewables and Efficiency) for current rebates in your state. Programs change yearly.
Dual fuel hybrid systems
The strongest answer for cold climates is a dual-fuel hybrid. Install a heat pump alongside an existing or new gas furnace. The thermostat runs the heat pump down to a balance point (typically minus 5 to minus 10 Celsius) and switches to the furnace below that.
The heat pump handles most of the heating hours (80 to 90 percent in a typical cold-climate winter) at high efficiency. The furnace handles only the coldest days, where heat pump efficiency drops and the heat pump output capacity may be insufficient.
This configuration captures most of the heat pump savings while keeping reliable cold-weather heating. The cost is higher (you are buying two systems), but utility rebates often cover the hybrid configuration specifically.
The summer cooling consideration
A heat pump also cools. If you currently have a separate AC unit, replacing both the AC and furnace with a single heat pump system eliminates one piece of equipment, one set of refrigerant lines, and one maintenance contract. The total cost compared to replacing a furnace and AC separately is similar or lower for a heat pump-only system.
A gas furnace alone provides no cooling. Pairing a gas furnace with a separate AC unit is the legacy approach and is being replaced by single-system heat pumps in new builds.
How to choose
Run the numbers with local utility rates. If electricity is cheap relative to gas, heat pump wins. If gas is much cheaper than electricity, gas wins or a dual-fuel hybrid wins.
Check your climate zone. Zones 1 through 4, heat pump only. Zones 5 and 6, cold-climate heat pump or dual-fuel hybrid. Zone 7, dual-fuel hybrid.
Check available rebates. The federal IRA rebates plus state rebates often make heat pumps cost-comparable to furnace replacements on the installation side, which changes the math substantially.
Consider lifespan. A modern gas furnace lasts 15 to 25 years. A modern heat pump lasts 12 to 18 years, with the compressor often needing replacement at year 10 to 15. Lifecycle cost analysis sometimes favors gas for owners planning to stay 20 plus years in the same home.
For more on the AC side of the equation see our AC types comparison and our methodology at /methodology.
Frequently asked questions
Will a heat pump work in cold climates?+
Modern cold-climate heat pumps (often labeled Hyper-Heat, Whisper-Heat, or with HSPF2 ratings above 10) maintain full rated capacity down to minus 15 degrees Celsius and operate at reduced capacity to minus 25. Standard heat pumps lose capacity below freezing and need supplemental heat. In climates with winter design temperatures above minus 20, a cold-climate heat pump handles the full heating load without backup.
How much does heat pump installation cost?+
A single-zone ductless mini-split installation runs 3500 to 6000 dollars. A central ducted heat pump replacing an existing furnace and AC runs 8000 to 15000 dollars depending on home size and ductwork condition. Federal and state incentives in 2026 cover 2000 to 8000 dollars of that depending on income and location. Check the Inflation Reduction Act rebates and your state energy office for current numbers.
Is a gas furnace cheaper to run than a heat pump?+
It depends on gas prices and electricity prices in your area. With gas at 1.20 per therm and electricity at 0.13 per kWh, a 95 percent AFUE gas furnace costs roughly the same as a HSPF2 9 heat pump per BTU delivered. With gas at 1.50 per therm or electricity at 0.10 per kWh, the heat pump wins clearly. Run the numbers with your actual utility rates.
Can I keep my furnace as backup for a heat pump?+
Yes, this is called a dual-fuel or hybrid setup. A control thermostat switches between the heat pump (for moderate temperatures) and the furnace (for extreme cold) based on a temperature threshold you set. This is the most efficient configuration for very cold climates, using cheap electricity for most days and falling back to gas only during deep cold snaps.
Are heat pumps loud?+
Modern units are 50 to 60 dB at 1 meter from the outdoor unit, similar to a conversational voice. They are quieter than older central AC condensers. Indoor air handlers in ducted systems are nearly silent. Ductless wall-mounted units are 25 to 35 dB at the indoor unit, much quieter than a window AC. Noise complaints with modern heat pumps are rare.
