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Quick answer: A heat pump is almost always cheaper to run than electric resistance heat, propane, or oil. Against a natural gas furnace it’s closer: with average U.S. electricity prices and typical gas prices, a heat pump has to average a seasonal efficiency (COP) of roughly 3 to beat a high-efficiency gas furnace on heating cost alone. Many modern heat pumps do that in mild and mixed climates; in very cold climates, a dual-fuel setup often wins. The heat pump also replaces your air conditioner, which a furnace can’t do.
“Heat pump or furnace?” is the question most homeowners ask when an old system is near the end of its life. The honest answer is that it depends on three numbers you can find on your own utility bills: what you pay for electricity, what you pay for gas (or propane or oil), and how cold your winters get. This guide shows you how to run the math yourself instead of relying on a sales pitch from either side.
The short version
| Heat pump | Gas furnace | |
|---|---|---|
| What it does | Heats and cools, using electricity | Heats only; you still need an AC for cooling |
| How it makes heat | Moves heat from outdoor air into the home | Burns natural gas (or propane or oil) |
| Efficiency | Can deliver up to 3 units of heat per unit of electricity (ENERGY STAR) | Converts most of the fuel to heat; high-efficiency models waste less up the flue |
| Running cost | Low vs. electric, propane, or oil; similar to gas in many areas | Low where natural gas is cheap |
| Very cold weather | Needs a cold-climate model or backup heat | No change in output |
| Combustion and CO risk | None from the unit | Needs venting and a CO alarm |
How each system makes heat
A furnace creates heat by burning fuel. Its efficiency is measured as AFUE (annual fuel utilization efficiency): a 95% AFUE furnace turns 95% of the energy in the gas into heat for your home, and the rest leaves through the vent. No furnace can go above 100%.
A heat pump doesn’t create heat; it moves it. It uses electricity to run a compressor that pulls heat out of the outdoor air and pumps it inside. Because moving heat takes less energy than making it, ENERGY STAR says an air-source heat pump can deliver up to three times more heat energy than the electrical energy it uses. That ratio is called the coefficient of performance, or COP. A COP of 3 means 300% efficiency.
The catch: a heat pump’s COP drops as it gets colder outside, because there’s less heat in the air to move. That single fact explains almost every “heat pump vs. furnace” argument you’ll read. If you want the full explanation of how the refrigerant cycle works, see what a heat pump is and how it works.
Running cost: the math, step by step
To compare fairly, convert every fuel to the cost of delivering one million BTU of heat into your home. Here are the conversions:
- 1 kWh of electricity = 3,412 BTU
- 1 therm of natural gas = 100,000 BTU
- 1 gallon of propane ≈ 91,500 BTU
For electricity we use the EIA 2025 U.S. average residential price of 17.30¢ per kWh. Gas and propane prices vary far more by region and season, so the prices below are example assumptions: swap in the numbers from your own bills.
| System | Efficiency | Price used | Cost per million BTU of heat | Example: 40 million BTU winter |
|---|---|---|---|---|
| Electric baseboard / electric furnace | 100% | 17.30¢/kWh | $50.70 | $2,028 |
| Propane furnace | 90% AFUE | $2.80/gallon (example) | $34.00 | $1,360 |
| Heat pump, cold-climate season | COP 1.8 | 17.30¢/kWh | $28.17 | $1,127 |
| Heat pump, typical season | COP 2.5 | 17.30¢/kWh | $20.28 | $811 |
| Older gas furnace | 80% AFUE | $1.50/therm (example) | $18.75 | $750 |
| Heat pump, mild-climate season | COP 3.0 | 17.30¢/kWh | $16.90 | $676 |
| High-efficiency gas furnace | 95% AFUE | $1.50/therm (example) | $15.79 | $632 |
How we calculated it: electricity: 293 kWh × price ÷ COP. Gas: 10 therms × price ÷ AFUE. Propane: 10.93 gallons × price ÷ AFUE. The 40 million BTU column is an example heating load; a small, tight home in a mild climate may need far less, a large, drafty home in the North far more.
The break-even point against gas
You can find your own break-even COP with one division:
Break-even COP = (electricity price per kWh × 293) ÷ (gas price per therm × 10 ÷ furnace AFUE)
With the numbers above (17.30¢/kWh, $1.50/therm, 95% AFUE), the break-even COP is about 3.2. Against an older 80% furnace, it drops to about 2.7. If your heat pump’s seasonal average beats that number, it’s cheaper to run than the furnace. Two things move the result a lot:
- Cheap electricity or expensive gas lowers the break-even point and favors the heat pump.
- Cheap gas or expensive electricity raises it and favors the furnace. Electricity prices vary widely by state, so always use your own rate.
Upfront cost
According to EnergySage 2026 marketplace data, a whole-home heat pump averages $15,393 before incentives, with ducted systems averaging $14,529 and hybrid (heat pump + furnace) systems $14,353. Compare quotes on the same basis: if you’re replacing both a furnace and an aging central AC, a heat pump replaces both, so put it against the price of a new furnace plus a new AC, not the furnace alone.
The federal heat pump tax credit (Section 25C) ended for systems placed in service after December 31, 2025, according to the IRS. Some state and utility rebates are still available; see our heat pump tax credit and rebates guide for what’s open in your state.
Dual fuel: when you don’t have to choose
A dual-fuel (hybrid) system pairs a heat pump with a gas or propane furnace. The heat pump handles most of the year, and the furnace takes over when it’s so cold that burning fuel becomes cheaper than running the heat pump. The switch happens automatically at a set outdoor temperature.
Dual fuel makes the most sense when:
- You already have a furnace in good condition and your AC needs replacing.
- Your winters regularly drop into single digits or below zero.
- Natural gas is cheap where you live, so the furnace wins on the coldest days.
Ask your installer to set the switchover point based on your actual energy prices, using the break-even math above, rather than a factory default.
Comfort, safety, and lifespan
- Air temperature: a furnace blows hotter air in short bursts. A heat pump delivers warm (not hot) air for longer stretches, which feels steadier but can feel cooler at the vent.
- Safety: a heat pump burns nothing, so the unit itself can’t produce carbon monoxide. Any home with gas appliances should still have CO alarms.
- Cooling and humidity: a heat pump works as a central air conditioner in summer and removes humidity. A furnace needs a separate AC.
- Lifespan: a heat pump runs year-round, so it works more hours than a furnace. Annual maintenance matters; see our heat pump maintenance checklist.
Which one should you choose?
| Your situation | Usually the better pick |
|---|---|
| You heat with electric baseboards, an electric furnace, propane, or oil | Heat pump |
| Mild or mixed climate and your AC is old | Heat pump |
| Cheap natural gas, newer furnace, very cold winters | Keep the furnace, or add a heat pump as dual fuel when the AC dies |
| Cold climate, no gas line | Cold-climate heat pump with backup heat (see how they handle the cold) |
| No ductwork in the house | Ductless heat pump (mini-split vs. central) |
Frequently asked questions
Is a heat pump cheaper to run than a gas furnace?
Sometimes. It depends on your electricity and gas prices and your climate. With average U.S. electricity prices and gas around $1.50 per therm, a heat pump needs a seasonal COP of roughly 3 to beat a 95% efficient gas furnace on heating cost. Against propane, oil, or electric resistance heat, a heat pump is usually much cheaper.
Can a heat pump completely replace a furnace?
Yes, in most climates, if it is sized for your home’s heating load. In very cold regions, choose a cold-climate model and plan for backup heat (electric strips or a furnace) for the coldest days.
What is a good COP for a heat pump?
COP changes with outdoor temperature. ENERGY STAR says air-source heat pumps can deliver up to three times more heat than the electricity they use (a COP of 3). Efficiency is lower on very cold days, which is why seasonal averages and cold-weather ratings matter.
Should I replace my furnace and AC with one heat pump?
If both are near the end of their life, a heat pump is often the simplest option because one system covers heating and cooling. Compare its quote with the combined price of a new furnace and a new AC.
Is dual fuel worth it?
Often, in cold climates with cheap natural gas and a furnace that still has years left. The heat pump covers most of the year and the furnace takes over only when burning gas is cheaper.
Sources
- ENERGY STAR: Air-Source Heat Pumps
- U.S. EIA: Electricity prices and factors affecting prices
- EnergySage: How Much Does a Heat Pump Cost? (updated March 19, 2026)
- IRS: FAQs on Sections 25C and 25D after Public Law 119-21
Energy prices change. Use the rates on your own utility bills for the most accurate comparison. If something here looks out of date, let us know.