Heat Pump vs Furnace: Which Is Cheaper to Run in 2026?
In most U.S. climates, a modern heat pump costs roughly 30–50% less to run than a gas furnace because it moves heat instead of burning fuel. Furnaces tend to stay cheaper only where natural gas is very cheap and winters are severe.
If you're replacing a heating system in 2026, the decision usually comes down to a modern heat pump or a gas furnace. The sticker price is only part of the story — what matters over ten years is what each one costs to run, and that gap has widened as heat pumps have become more efficient.
The reason a heat pump wins on running cost comes down to physics. A gas furnace turns most of the fuel you buy into heat — good, but capped at 100% efficiency. A heat pump moves heat instead of making it, delivering roughly three units of warmth for every unit of electricity it draws.
What each system costs to run
Using 2026 national-average energy prices for a typical 2,000 sq ft home in a mixed climate, here are the modelled annual heating costs. Your local rates will shift these numbers — the calculators linked below let you run your own.
| System | Efficiency | Modelled annual cost |
|---|---|---|
| Cold-climate heat pump | ~300% (COP ~3) | ~$960 |
| High-efficiency gas furnace | 96% AFUE | ~$1,780 |
| Electric resistance / baseboard | 100% | ~$2,900 |
| Oil furnace | 85% AFUE | ~$2,400 |
When a furnace still wins
A gas furnace can be the cheaper choice in two situations: where natural gas is unusually cheap relative to electricity, and in severe-cold regions where a heat pump would lean heavily on backup resistance heat during long cold snaps. Many homeowners split the difference with a dual-fuel system.
How to decide for your home
| Cold-climate heat pump | $960 | |
|---|---|---|
| High-efficiency gas furnace | $1,780 | |
| Oil furnace | $2,400 | |
| Electric resistance | $2,900 |
Same 2,000 sq ft mixed-climate baseline and 2026 national-average prices used throughout this guide. Modelled estimates, not metered results. Derived from DOE efficiency guidance and EIA residential price data.
Which system fits your situation
- Find your current heating fuel and its local price.
- Estimate your home's heating load (our Heat Pump ROI Calculator does this from square footage and fuel).
- Get quotes for a cold-climate heat pump and a high-efficiency furnace.
- Subtract every incentive you qualify for from the heat pump quote.
- Compare payback: upfront difference divided by annual savings.
Sources
- Heat Pump Systems — U.S. Department of Energy — Energy Saver. Consulted July 22, 2026.
- Energy Star product guidance — U.S. EPA / DOE — Energy Star. Consulted July 22, 2026.
- Electric Power Monthly (residential electricity prices) — U.S. Energy Information Administration. Consulted July 22, 2026.
Frequently asked questions
Do heat pumps work in cold climates?
Yes. Cold-climate (ccASHP) models are rated to hold capacity down to around 5°F and keep working below 0°F, though efficiency drops and a backup heat source is recommended for the coldest days.
Is a heat pump cheaper than a furnace?
To run, usually — clearly so against oil and propane, and generally against natural gas. Upfront it often costs more before incentives, which is why payback time matters more than sticker price.
Is there still a federal tax credit for heat pumps?
Not for equipment placed in service in 2026. The Energy Efficient Home Improvement Credit (25C) terminated for property placed in service after 31 December 2025. State and utility rebates may still apply.