Heat Pump vs. Furnace: Which Is Right for Your Home and Climate?

Heat pumps have gone from a warm-climate novelty to the most talked-about HVAC technology in America. Sales have outpaced gas furnaces for three consecutive years, driven by improved cold-climate performance, federal incentives, and growing electrification trends. But the decision between a heat pump and furnace depends on your specific climate, energy costs, and home setup.

How Heat Pumps Work

A heat pump is essentially an air conditioner that can run in reverse. In summer, it moves heat from inside your home to outside (cooling). In winter, it extracts heat from outdoor air and moves it inside (heating). This sounds counterintuitive - how do you extract heat from cold air? - but even at 30F, there's significant thermal energy in the air. Modern heat pumps extract it efficiently down to 0-5F, and cold-climate models (like Mitsubishi Hyper-Heating) work at -13F.

Because heat pumps move heat rather than generate it (unlike a furnace that burns fuel), they're dramatically more efficient. A heat pump delivers 2-4 units of heat for every 1 unit of electricity consumed. A gas furnace, even at 96% efficiency, delivers less than 1 unit of heat per unit of fuel energy.

How Gas Furnaces Work

A gas furnace burns natural gas (or propane) to create heat, which is distributed through your ductwork by a blower fan. Modern high-efficiency furnaces achieve 96-98.5% AFUE, meaning nearly all the fuel energy becomes heat. Gas furnaces produce very hot air (120-140F) and heat homes quickly, even in extreme cold. They work at any outdoor temperature with no efficiency loss.

The Climate Decision

Mild to moderate climates (Southeast, Southwest, Mid-Atlantic, Pacific Northwest): A heat pump is almost always the better choice. It handles both heating and cooling in a single unit, operates more efficiently than a furnace + AC combination for most of the year, and qualifies for federal tax credits up to $2,000. In these regions, a heat pump alone can handle all your heating needs.

Cold climates (Upper Midwest, Northeast, Mountain West): The decision is more nuanced. Standard heat pumps lose efficiency below 30F and struggle below 10-15F. Cold-climate heat pumps (Mitsubishi Hyper-Heating, Carrier Infinity with Greenspeed, Bosch IDS) extend the range to -5 to -13F. In the coldest climates, a dual-fuel system is the ideal solution: a heat pump handles heating down to 25-35F (where it's most efficient), then a gas furnace takes over for colder temperatures. This gives you the efficiency of a heat pump for 80% of heating hours and the reliability of gas for the coldest days.

The Energy Cost Calculation

Whether a heat pump or furnace is cheaper to operate depends on your local electricity and natural gas prices. The general rule: if electricity costs less than 3x the cost of natural gas (per BTU), a heat pump is cheaper to operate. In most of the U.S., this math favors heat pumps. But in areas with very cheap natural gas and expensive electricity, a furnace can be more economical.

A practical example: in a moderate climate, heating a 2,000 sq ft home for the season might cost $800 with a gas furnace (96% AFUE) or $550 with a heat pump (10 HSPF2) - a savings of $250/year. Over a 15-year system life, that's $3,750 in energy savings, plus the heat pump eliminates the need for a separate AC unit.

Federal Tax Credits

The Inflation Reduction Act provides up to $2,000 in tax credits for qualifying heat pump installations. There is no equivalent credit for gas furnaces. This credit can cover 15-25% of the total installation cost, significantly improving the heat pump's financial case. Combined with utility rebates, the effective cost of a heat pump can be comparable to or less than a furnace + AC combination.

Our Recommendation

For most homeowners: Install a heat pump. The efficiency, dual heating/cooling capability, environmental benefits, and federal tax credits make it the smart default choice. If you're in a cold climate, consider a cold-climate model or a dual-fuel setup. Keep your gas furnace if you have very cheap natural gas ($0.50/therm or less), expensive electricity ($0.20/kWh or more), or an older home that would need significant electrical upgrades to support a heat pump.