Heat Pump vs. Gas Furnace: Which Is Cheaper to Run?

Heat pumps have gone from niche to mainstream in the US, outselling gas furnaces in recent years. They heat and cool with one machine, and modern cold-climate models work well below 0 °F. But whether a heat pump saves money depends far more on your local energy prices than on the equipment itself.

Why heat pumps are so efficient

A gas furnace burns fuel to make heat. The best models turn about 95% of the gas energy into heat in your home. A heat pump does not make heat — it moves it from the outside air into your house. For every unit of electricity it uses, it delivers 2 to 4 units of heat. That ratio is called the coefficient of performance (COP), or seasonal efficiency when averaged over a winter.

The break-even formula

To compare fairly, convert both fuels to the same unit. One therm of natural gas contains about 29.3 kWh of energy.

• Gas heat cost per kWh = gas price per therm ÷ 29.3 ÷ furnace efficiency
• Heat pump cost per kWh of heat = electricity price ÷ seasonal efficiency

Example: gas at $1.40 per therm and a 95% furnace gives about $0.050 per kWh of heat. A heat pump with a seasonal efficiency of 3.0 and electricity at $0.17 gives about $0.057 per kWh — slightly more expensive. At $0.13 electricity, the heat pump becomes cheaper.

Where heat pumps win clearly

• Homes heated with propane, heating oil or electric baseboard. Against these fuels, a heat pump almost always cuts running costs, often by 30–60%.
• Regions with cheap electricity, such as much of the Pacific Northwest and the Southeast.
• Homes that need new air conditioning anyway. A heat pump replaces both systems, so you avoid buying a separate AC unit.

Where gas can still be cheaper

In states with low gas prices and high electricity rates — parts of New England and California, for example — running costs can be similar or slightly higher with a heat pump. A dual-fuel setup (heat pump plus gas furnace as backup for the coldest days) is a common compromise.

Upfront cost and incentives

A ducted whole-home heat pump typically costs $8,000–$20,000 installed, depending on size, climate and ductwork. The federal tax credit for heat pumps ended for equipment installed after 2025, but many states and utilities still offer rebates, sometimes several thousand dollars. Check your utility’s website and your state energy office before you buy.

How to get the best efficiency

• Choose a model rated for your climate (look for cold-climate listings if you have harsh winters).
• Insist on a proper load calculation (Manual J) instead of a rule-of-thumb size. Oversized units cycle on and off and run less efficiently.
• Seal and insulate ducts in attics and crawl spaces.
• Avoid large thermostat setbacks; heat pumps work best holding a steady temperature.