Heat pumps have moved from a niche, cold-climate-skeptical technology to the default recommendation for most new heating and cooling installations in the US, as the equipment itself has improved and energy costs have made all-electric heating more competitive with gas. The technology is genuinely well suited to a wide range of homes, but the financial case and the incentive landscape have shifted meaningfully, so it's worth working through the current numbers rather than assuming figures from a few years ago still apply.
What a heat pump actually does differently
A furnace generates heat by burning fuel; a heat pump instead moves existing heat from one place to another, extracting warmth from outdoor air, even cold outdoor air, and concentrating it indoors during winter, then reversing the process to cool the home in summer. Because it's moving heat rather than generating it from combustion, a heat pump can deliver multiple units of heating or cooling energy for every unit of electricity it consumes, which is the source of its efficiency advantage over both electric resistance heating and, in many climates, gas furnaces.
Cold climates are no longer a dealbreaker
Older heat pump technology genuinely struggled in very cold climates, losing efficiency and heating capacity as outdoor temperatures dropped well below freezing. Modern cold-climate heat pumps have substantially closed that gap and now maintain meaningful heating capacity down to temperatures well below zero Fahrenheit, which has made them a realistic primary heating option in much of the northern US, not just a supplement to a furnace. It's still worth confirming a specific model's cold-climate performance rating rather than assuming all heat pumps perform equally at low temperatures, since the technology varies significantly between models.
The federal tax credit picture has changed for 2026
For several years, the federal Energy Efficient Home Improvement Credit, Section 25C, covered up to 30 percent of a qualifying heat pump's cost, capped at $2,000. That credit expired for any equipment placed in service after December 31, 2025, following the One Big Beautiful Bill Act signed into law in mid-2025; the IRS confirms there is no federal 25C credit available for heat pumps installed in 2026. This is a genuine change worth factoring into the budget for anyone comparing quotes now against figures they may have seen or been quoted a year or two ago.
A heat pump installed in 2025 and one installed in 2026 can have an identical price tag and a very different actual cost to the homeowner, purely based on a federal tax credit that no longer applies. It's worth double-checking that any cost comparison you're looking at reflects current, not historical, incentives.
What incentives are still available
State and utility-level rebate programs are less consistent than the old federal credit was but remain genuinely valuable in many areas, and some have expanded specifically to help offset the loss of the federal incentive. IRA-funded HOMES and HEAR rebate programs, administered at the state level, are rolling out on different timelines depending on the state, and many utilities separately offer their own rebates for high-efficiency heat pump installation. Checking your specific state energy office and utility's current offerings, since these change more often than most homeowners expect, is worth doing before finalizing a purchase.
Ducted versus ductless (mini-split) systems
A home with existing ductwork in reasonable condition can typically use a ducted heat pump as a relatively direct furnace and central air conditioner replacement. A home without ductwork, or with ductwork that's in poor shape, is often a better fit for a ductless mini-split system, which uses one or more wall-mounted indoor units connected to an outdoor compressor, avoiding the cost of installing or repairing ducts entirely. Multi-zone mini-split systems, with several indoor units on one outdoor compressor, also allow different rooms to be heated or cooled independently, which isn't possible with most single-zone ducted systems.
- Ducted heat pump: best for homes with existing, functional ductwork; replaces both furnace and central AC in one system.
- Single-zone mini-split: good for a single room or small addition without existing ducts.
- Multi-zone mini-split: covers multiple rooms independently without ductwork, at a higher equipment cost than a single zone.
How a heat pump compares to keeping a gas furnace
The comparison depends heavily on local electricity and gas prices, which vary enormously by region and utility. In areas with relatively cheap electricity and expensive gas, or in states pushing electrification through their own incentive programs, a heat pump often wins on operating cost alone; in areas with cheap natural gas and expensive electricity, the operating cost comparison is closer or can favor gas, even though the heat pump still offers the added benefit of replacing a separate air conditioner. Pairing a heat pump with rooftop solar, where the economics work for the home as covered in our guide to whether home solar is worth it, can improve the electric-heating cost comparison further by offsetting some of the electricity the heat pump consumes.
Frequently asked questions
Will a heat pump actually keep my house warm in a cold winter?
Modern cold-climate heat pump models maintain meaningful heating output well below freezing, and many are rated to continue operating effectively down to temperatures around negative 10 to negative 15 degrees Fahrenheit; checking the specific model's cold-climate performance rating, rather than assuming all heat pumps perform the same, is the important step before relying on one as a sole heat source in a very cold climate.
Is a heat pump cheaper to run than a gas furnace?
It depends heavily on local electricity and gas prices, which vary significantly by region; a heat pump is generally more efficient at converting energy into heat, but whether that translates into lower monthly bills depends on the specific cost per unit of electricity versus gas in your area.
Do I need to replace my ductwork to install a heat pump?
Not necessarily; existing ductwork in good condition often works fine with a ducted heat pump system, and homes without ductwork can use a ductless mini-split system instead, which avoids the ductwork question entirely.