How much can you save with a heat pump in 2026?

There’s no doubt that a heat pump uses far less energy compared to any other heating system. But can it actually save you money?

Like any other big purchase, it depends. Installing a heat pump often costs less than simply swapping in a new AC and furnace or boiler—especially because it's a 2-in-1 system. But that's not always the case.

Once installed, your total energy use (and carbon footprint) will drop with a heat pump, but your energy bills might be a different story. 

Data suggest the average household saves $370 annually by switching to a heat pump, with $60 savings on the low end and $840 on the high end. The math all depends on individual circumstances: Your home, your climate, your local energy prices and policies, what kind of heating fuel you’d be replacing, and the HVAC contractor. 

Heat pumps could save you cash in two ways: on the upfront cost of installation, or on the long-term cost of running your HVAC—or both. Here's where and when they tend to win.

In warm climates

If it rarely drops below freezing where you live, a heat pump is almost a no-brainer. The system can easily handle all your heating and cooling needs without breaking a sweat. You can keep a backup heater for the occasionally cold snap, but you'd probably never use it—especially because most modern heat pumps can still successful heat when outdoor temperatures are sub-zero.

Heat pumps have two key advantages in mild climates:

• Upfront cost. You won't need a heavy-duty cold-climate system, so equipment and installation costs are lower—often barely more than a central AC alone. You can still pay a little more for a high-performance model, and it's often worth it, but it's not strictly necessary.

• Lower bills year-round. Heat pumps are extremely efficient in mild weather and cost much less to run than any other type of heating when temps stay above 40°F. High-performance models also cut cooling bills significantly compared to older, lower-efficiency central ACs.

States where heat pumps save money vs. gas heat

Source: EIA Electric Power Monthly and EIA Natural Gas Prices, March 2026. Assumes heat pump winter sCOP 2.5, gas furnace 80% AFUE. States with insufficient gas price data excluded.

It's still not a coincidence that the states with the most heat pumps are mostly in the South. Mild winters and relatively favorable electricity-to-gas price ratios make the economics work there more consistently than anywhere else.

If you're switching from propane, oil, or electric resistance heating

If you're heating with propane, heating oil, or standard electric resistance heat right now, a heat pump is almost certain to reduce your energy bills. A heat pump study by the National Labratory of the Rockies (NRL, formerly National Energy Laboratory or NREL) found that homeowners saw a median annual savings of $300-$650 after making the switch.

The savings depend on two factors:

• Heat pump efficiency. In mild weather, a heat pump can deliver $2-$3 worth of heating for every $1 of electricity it uses. In colder conditions, that advantage narrows, but modern cold-climate models tested by the DOE still outperform propane and oil even on frigid days. How efficient your specific system turns out to be depends on your climate and how well it's installed—a poorly installed heat pump can underperform by 20–30%.

• Local energy prices. This doesn’t change the math compared to “regular” electric heat, because it’s the same power source. But a heat pump’s advantage over propane or oil varies depending on the price, which varies from week to week and place to place. A kWh of electricity needs to be less than 8% of the cost of a gallon of oil, and less than 12% of a gallon of propane. (A gallon of oil, believe it or not, can produce more heat than a gallon of propane.)

Average predicted heating bill savings with a heat pump

Source: EIA data. Heat pump sCOP 2.5, oil and propane 80% AFUE.

Even when a heat pump costs more upfront than staying on propane or oil, the long-run operating savings often close that gap quickly.

Source: EIA data, Jan. 2024 oil and propane prices, Nov. 2023 electricity prices. Heat pump sCOP 2.5, oil and propane 80% AFUE.

So even if the heat pump doesn’t quite win on upfront installation costs, it could win in the long run through savings on utility bills. 

If you want central air conditioning, but don’t have ductwork 

Forget about the heat: If your home has no ductwork, a ductless mini-split heat pump tends to be the least-expensive and least-invasive way to install permanent AC. The average ductless system costs $25,957 based on EnergySage Marketplace data—which sounds like a lot until you compare it to retrofitting all-new ductwork ($4,000–$10,000) plus a central air conditioner ($12,000–$15,000). We cover the details in our mini-split cost guide.

With hybrid heat pump systems

A hybrid setup—sometimes called dual fuel or backup heat—pairs a heat pump with a second heating source (gas furnace, boiler, or electric strips). The heat pump handles all your cooling and most of your heating; the backup system kicks in when it's very cold outside.

With today's cold-climate heat pumps, you don't need a hybrid setup just to stay warm. But it can make financial sense in some situations: a heat pump's efficiency advantage over gas narrows as temperatures drop, so a hybrid system that automatically switches to the cheaper fuel at that crossover point can lower your annual energy costs. It can also reduce upfront installation costs if you only need to replace your AC while the furnace still has years of life left.

Average hybrid heat pump installation costs $14,353 on the EnergySage Marketplace—one of the more affordable entry points into heat pump ownership.

If you pair with solar

With electricity prices averaging around $0.18/kWh in 2026 and expected to rise, the cost of running a heat pump from the grid is going up. Pairing a heat pump with rooftop solar is one of the most effective ways to offset that.

On average, you'd probably need between 8 and 11 solar panels to power a heat pump, though it really depends on your home's electricity use and climate. The math works best where grid electricity is expensive and solar policies are favorable, but even a partial offset can shift the long-run economics significantly. If the ongoing cost of electricity is what's giving you pause about a heat pump, solar is worth considering.

Heat pumps are likely to save you money on heating and cooling, but it's not guaranteed. If you live in a cold climate and currently have natural gas for heat, a heat pump will usually cost more to run—and often more to install—than a new gas furnace or boiler. This tends to be true even after incentives.

On the equipment side, the wholesale cost of a cold-climate heat pump is roughly three times the cost of a basic furnace and twice the cost of a boiler. Installation also takes more time and a different skill set, so labor costs can be higher.

On the operating side, heat pumps are extraordinarily efficient, but natural gas remains cheap enough in many markets to offset that efficiency advantage. For a heat pump to win on operating costs against gas, the price per kWh of electricity generally needs to be 10% or less of the price per therm of gas.

System installation costs compared

That said, the cold-climate picture has more nuance than a simple thumbs-down:

• You'll save on cooling. High-efficiency inverter heat pumps have significantly better SEER ratings than the aging central ACs many homes still have. A heat pump with a 16 SEER2 rating uses about 70% less energy than a 10 SEER model. In some cases, cooling savings can offset higher heating bills.

• A cold-climate heat pump can still cost less than AC + furnace combined. If you're replacing both systems, a heat pump can come out ahead—especially if you shop around aggressively.

• You might save if your old system was very inefficient. Researchers have noted that replacing a poorly maintained, older HVAC system with a heat pump can result in lower operating costs even in cold climates—especially if duct work or weatherization upgrades are part of the installation.

• Energy price trends favor heat pumps over time. As electricity prices have risen, natural gas prices have also climbed. And as the grid gets cleaner, the efficiency advantage of heat pumps compounds. The math is moving in heat pumps' direction in most markets.

The average heat pump payback period is within 10 years, but truthfully, heat pump payback periods are hard to pin down precisely—and that's not a cop-out. Installation costs, infrastructure upgrades, incentives, and energy prices all vary too much for any single calculator to give you an accurate answer. What we can offer is a framework for estimating it.

Step 1: Estimate the cost of installation. Our guides to heat pump costs and mini-split costs will give you a starting range based on your home type and system size. Getting two or three quotes from local contractors is the most reliable way to get a real number.

Step 2: Estimate operating savings. The tables above give you a rough sense of savings potential based on what fuel you're replacing. For a more detailed estimate:

• EnergySage's heat pump energy use guide shows how much energy a home like yours in a climate like yours typically uses for heating and cooling.

• The Efficiency Maine heating calculator is one of the better tools for calculating heating cost comparisons between systems.

• A simple SEER savings calculator can help you estimate cooling savings by comparing SEER ratings for your old and new systems.

Step 3: Factor in incentives. Subtract any state, utility, or HEEHRA rebates you qualify for from your installation cost before calculating payback. These can make a meaningful difference—particularly for income-qualifying households.

Step 4: Account for rising electricity prices. With residential electricity costs already up roughly 7–10% year over year in early 2026, the long-run economics of anything that reduces your grid electricity use (or pairs with solar to offset it) are shifting in a favorable direction.

If the numbers look promising and you're ready to get quotes, the EnergySage Marketplace makes it easy to compare offers from experienced, pre-screened heat pump contractors in your area. When you sign up (free), we'll connect you with an EnergySage Energy Advisor—one of our in-house experts who can help you make sense of your quotes, available incentives, and whether the investment pencils out for your specific home.

And if electricity costs are the thing giving you pause, it might be worth looking at rooftop solar alongside your heat pump. The two work exceptionally well together—solar offsets the electricity your heat pump consumes, and a heat pump gives your solar system more load to power.