Heat Pump vs Furnace 2026: Which Saves You More Money?

The Short Answer

It depends on your electricity and gas prices more than on the equipment. At U.S. average prices the two are close: a heat pump delivering three units of heat per unit of electricity costs about the same to run as a high-efficiency gas furnace. Where electricity is cheap or gas is expensive, the heat pump wins; where gas is cheap, the furnace does.

The national research points the same way. A National Renewable Energy Laboratory study found that 62% to 95% of households, depending upon heat pump efficiency, would see lower energy bills with a heat pump. For homes that heat with electricity, fuel oil or propane, it was 92% to 100%. The same release is frank about the catch: natural gas is much cheaper than electricity per unit of energy, and because of high installation costs heat pumps may only be financially feasible for a smaller portion of households.

Side by Side

	Heat pump	Gas furnace
How it heats	Moves heat from outdoors; up to three times more heat energy than the electricity it uses	Burns gas; 90% to 98.5% AFUE for high-efficiency models, 80% to 83% for mid-efficiency
Also cools?	Yes. It replaces the air conditioner	No. Needs a separate air conditioner
Cold weather	Cold-climate models are designed to perform down to 5°F; ENERGY STAR suggests a backup source below that	Output does not depend on outdoor temperature
Installed cost (HomeAdvisor, June 2026)	$4,500 to $8,000 for an air-source heat pump	$3,800 to $10,000 for a gas furnace
When ENERGY STAR says to consider replacing	More than 10 years old	More than 15 years old

Running Cost: The Sum to Do With Your Own Bills

Compare the cost of one million BTU of heat delivered to the house. The conversion figures are from the Energy Information Administration: 1 kWh is 3,412 BTU and 1 cubic foot of natural gas is 1,036 BTU.

Electricity: price per kWh ÷ 3,412 × 1,000,000, then divide by the heat pump’s efficiency (3 if it delivers three times the electricity it uses).
Gas: price per thousand cubic feet ÷ 1.036, then divide by the furnace’s AFUE (0.95 for a 95% furnace). If your bill is in therms, start from the price per therm × 10 instead, then divide by the AFUE.

Here is that sum at U.S. average residential prices for 2025, the latest full year: 17.3 cents per kWh for electricity and $15.34 per thousand cubic feet for gas. The results are our own arithmetic on EIA’s figures.

System	Cost per million BTU of heat
Heat pump delivering 3× (the Department of Energy’s “up to” figure)	About $16.90
Heat pump delivering 2×	About $25.35
Gas furnace, 95% AFUE	About $15.60
Gas furnace, 80% AFUE	About $18.50
Electric resistance heat (furnace or baseboard)	About $50.70

Two things to take from it. Against a gas furnace, the result turns on how efficient the heat pump is over a whole winter and on your local rates, so run the numbers with your own bills. Against electric resistance heat there is no contest: the Department of Energy says a heat pump can cut electricity use for heating by up to 75%.

EIA expects the average residential electricity price to be 18.2 cents per kWh in 2026, so check current rates before deciding.

Cold Climates

The old rule that heat pumps do not work in the cold is out of date. The Department of Energy says the technology has advanced so that it now offers a legitimate space heating alternative in colder regions, and the NREL study found the savings were most significant in colder climates.

What matters is buying the right kind. To carry the ENERGY STAR Cold Climate label, a heat pump must keep at least 70% of its heating capacity at 5°F and reach a COP of at least 1.75 there, meaning it still delivers 1.75 times the electricity it uses. ENERGY STAR adds that a cold-climate model keeps working below 5°F, but that pairing it with a backup source heats the home most efficiently when it is colder still.

Dual Fuel: Using Both

A dual-fuel (hybrid) system pairs a heat pump with a gas furnace. The Department of Energy describes it as combining the efficiency of a heat pump with the reliability of a gas furnace. The heat pump handles milder weather and the furnace takes over in the cold; Trane says its systems switch when the temperature drops below freezing with a standard heat pump, or below 5°F with a cold-climate one. It is worth a look if you already have a good gas furnace and are replacing the air conditioner anyway.

Incentives in 2026

The federal tax credit has ended. The Energy Efficient Home Improvement Credit, which covered up to $2,000 for a heat pump, applies only to improvements made through December 31, 2025, according to the IRS. Some older web pages still describe it as available; they are out of date.
State rebates exist in some states. The Department of Energy says Home Energy Rebates are now available in select states and directs you to your state or territory energy office for status and eligibility.
Check your utility. Many utilities run their own heat pump rebates, separate from the federal programmes.

A Rule Coming for Furnaces, Possibly

A Department of Energy rule published in December 2023 would raise the minimum for new gas furnaces from 80% to 95% AFUE from December 18, 2028. It is under legal and regulatory review and may change, so do not plan around it yet. It matters only if you were counting on a cheaper 80% furnace later.

Which Should You Choose?

You heat with electric resistance, oil or propane: a heat pump is very likely to cut your bills.
You have gas and need a new air conditioner anyway: price a heat pump against the air conditioner. It cools the same way and adds efficient heating, and you can keep the furnace as backup (dual fuel).
You have gas, a working air conditioner and low gas prices: the running-cost case is weak. Do the sum above with your own rates first.
You live where it regularly drops below 5°F: choose a cold-climate model and plan for a backup heat source.

Not sure where your home loses the most energy? Take the quick quiz. And if you already have a heat pump, the settings matter as much as the equipment: see emergency heat vs auxiliary heat.

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Frequently Asked Questions

Is a heat pump cheaper to run than a gas furnace?

It depends on local prices. At 2025 U.S. average prices, a heat pump delivering three times the electricity it uses costs about $16.90 per million BTU of heat, against about $15.60 for a 95% gas furnace and $18.50 for an 80% one. An NREL study found 62% to 95% of households would see lower bills with a heat pump, depending on its efficiency.

Do heat pumps work in cold climates?

Yes, with the right model. The Department of Energy says cold-climate heat pumps are designed to perform down to 5°F, and ENERGY STAR requires its cold-climate models to keep at least 70% of their capacity at that temperature.

Is there still a federal tax credit for heat pumps in 2026?

No. The IRS says the Energy Efficient Home Improvement Credit applies only to improvements made through December 31, 2025. Some states have Home Energy Rebates; check with your state energy office.

How efficient is a gas furnace compared with a heat pump?

The Department of Energy puts high-efficiency furnaces at 90% to 98.5% AFUE. A heat pump can deliver up to three times more heat energy than the electricity it consumes, because it moves heat instead of generating it.

What is a dual-fuel system?

A heat pump paired with a gas furnace. The heat pump heats in milder weather and the furnace takes over when it gets cold.

Related Guides

Emergency heat vs auxiliary heat — the settings that decide a heat pump’s running cost
Best thermostat for a heat pump — models that can limit auxiliary heat
Heat pump runs constantly in winter — what to expect once you have one
How much does an energy audit cost? — worth doing before a big purchase

Heat Pump vs Gas Furnace in 2026: Which Costs Less to Run?