Heat pump vs. furnace: how to decide for your climate

How does a heat pump heat a home?

A heat pump works much like a refrigerator, using electricity to move heat from a cooler space into a warmer one, as the U.S. Department of Energy explains. In winter it draws heat from the outdoor air and moves it into your home, and in summer it reverses the process and moves heat from your home to the outdoors, so one system handles both heating and cooling. ENERGY STAR notes that because a heat pump moves heat instead of converting it from fuel, an air-source heat pump can deliver up to three times more heat energy to a home than the electrical energy it consumes.

Most homes that switch use an air-source heat pump. ENERGY STAR describes a ducted model as similar to a central air conditioner that also works in reverse, and it says that in most climate zones one can be installed as a drop-in replacement when a central air conditioner or a furnace needs replacing, using the existing ductwork. For homes without ducts, ductless mini-split heat pumps mount on an interior wall or ceiling with an outdoor unit. The Department of Energy adds that geothermal heat pumps, which exchange heat with the ground or a nearby water source, cost more to install and have low operating costs.

How does a furnace heat a home?

A furnace creates heat by burning fuel, and ENERGY STAR defines a residential furnace as a heating unit that burns natural gas, propane or oil to heat the home with forced hot air, and the unit includes the burners, heat exchangers and blower that move warm air through the ducts. A furnace provides heat only, so summer cooling comes from a separate system such as a central air conditioner.

ENERGY STAR lists among the benefits of heat pumps that they involve no combustion, which improves indoor air quality because there are no direct emissions such as nitrogen oxides, carbon dioxide or carbon monoxide, and that they remove the need for fuel storage and the risk of running out of fuel. For any heating and cooling system, ENERGY STAR recommends regular maintenance to prevent problems and unwanted costs, and our home maintenance checklist includes seasonal HVAC tasks.

What do AFUE, HSPF2 and SEER2 mean?

For furnaces, ENERGY STAR describes Annual Fuel Utilization Efficiency (AFUE) as, in general, the percentage of the heat in the incoming fuel that is converted to space heat instead of being lost. To earn the ENERGY STAR label, a gas furnace needs an AFUE of 97% or more in the northern half of the country and 95% or more in the southern half, and an oil furnace needs 87% or more.

Heat pumps carry two seasonal ratings: HSPF2 (Heating Seasonal Performance Factor 2) divides the total heat a heat pump delivers over a heating season by the electricity it uses, and SEER2 (Seasonal Energy Efficiency Ratio 2) does the same for cooling, and for both a higher number means more efficient equipment. ENERGY STAR certification for a split-system air-source heat pump requires at least 7.8 HSPF2, 15.2 SEER2 and 11.0 EER2, a third rating that measures cooling efficiency at a steady rate. Because AFUE measures fuel and HSPF2 measures electricity, the two numbers cannot be compared directly, which is why local energy prices and your contractor's estimate matter when you weigh operating costs.

Do heat pumps work in cold climates?

The Department of Energy notes that air-source heat pumps were long avoided in areas with extended periods of subfreezing temperatures and that advances in the technology have made them a legitimate option for colder regions. ENERGY STAR says many new certified models provide space heating even in the coldest climates, using advanced compressors and refrigerants that improve low-temperature performance.

To earn the ENERGY STAR cold climate designation, a heat pump must be tested at 5°F and must keep at least 70% of its 47°F heating capacity at that temperature, with a coefficient of performance of at least 1.75. Cold climate models also need higher heating ratings, such as 8.1 HSPF2 for ducted split systems and 8.5 HSPF2 for ductless ones. ENERGY STAR adds that a cold climate heat pump keeps working below 5°F, and that pairing it with a backup heat source heats a home most efficiently when temperatures drop even lower. If your winters regularly fall below freezing, it recommends asking your contractor for a certified cold climate model suited to your home.

What is a dual-fuel system?

A dual-fuel system pairs an electric heat pump with a gas or oil furnace, so you can heat with either one. ENERGY STAR suggests considering this setup if you have a relatively new furnace and an older central air conditioner, or if you plan to add central air to a home with a furnace, because installing a certified heat pump in place of the air conditioner creates a dual-fuel system for a modest extra cost. The arrangement gives you the flexibility to use each system when it makes the most sense based on costs and environmental benefits. ENERGY STAR also advises that a heat pump is more efficient than a furnace or boiler even in winter, and that if you have both, you should use the heat pump year-round.

Is there a federal tax credit for a heat pump or furnace in 2026?

The Energy Efficient Home Improvement Credit (section 25C) no longer applies to new installations. In its fact sheet FS-2025-05, dated August 21, 2025, the IRS states that under Public Law 119-21, the 2025 law commonly known as the One, Big, Beautiful Bill, the credit will not be allowed for any property placed in service after December 31, 2025. The IRS page for the credit, last updated April 28, 2026, describes it as covering property placed in service from January 1, 2023, through 2025, with up to $2,000 per year for qualified heat pumps and up to $600 for a qualifying natural gas, propane or oil furnace within a $1,200 annual limit. Some older product pages still describe the credit as available, so rely on the IRS pages and ask a tax professional about your own return. Utilities may still offer rebates, and ENERGY STAR suggests checking with yours.

How do you decide which system fits your home?

A good first step is an accurate estimate of how much heat your home needs. ENERGY STAR advises that your contractor verify the right system size with a Manual J calculation, which estimates how much heating and cooling your home needs, because equipment that is too large or too small will struggle to keep you comfortable. From there, weigh your winters, your existing ductwork and your current fuel. ENERGY STAR notes that switching from electric resistance, propane or oil heat to a heat pump lowers energy bills, and that a typical household spends about $1,900 a year on energy, with almost half going to heating and cooling. If you already have a newer furnace, a dual-fuel setup may fit, and our home energy section covers other ways to reduce heating costs.

If you choose a heat pump, ENERGY STAR offers a few operating habits that help it run efficiently. Pick a comfortable temperature and leave it there, because heat pumps do not save energy when turned down at night or while you are away, the way a furnace can. Set the thermostat to heat or cool instead of auto, use the auto fan setting or the lowest fan speed that reaches your rooms, and clean the filters when they look dirty or when the filter light comes on.