Heat Pumps 101: How They Work and Whether They'll Work for You
Heat pumps went from obscure HVAC technology to dinner party conversation in about three years. Suddenly everyone's asking the same questions. Do they really work when it's freezing? What about my gas furnace? Is this just another expensive green thing?
Here's the reality. Heat pumps aren't magic, and they're not for everyone. But for a lot of homes, they genuinely make sense. This guide will help you figure out if yours is one of them.
What a Heat Pump Actually Does
A heat pump moves heat rather than generating it. That distinction matters.
Your gas furnace burns fuel to create heat. Simple. Expensive. Dirty.
A heat pump extracts heat from outside air (yes, even cold air) and moves it inside. In summer, it reverses, pulling heat from your home and pushing it outside. One system handles heating and cooling.
The technology isn't new. Your refrigerator uses the same principle. Air conditioners too. Heat pumps are essentially air conditioners that can run in reverse.
How Efficient Are We Talking?
This is where heat pumps shine.
A gas furnace converts 95-98% of fuel energy into heat. Sounds good until you realize that's the ceiling. You can't exceed 100% efficiency.
Heat pumps don't create heat—they move it. They can deliver 3-4 units of heat for every unit of electricity consumed. That's 300-400% efficiency. Seems impossible until you understand they're not creating energy, just relocating it.
Modern cold-climate heat pumps maintain this efficiency down to 5°F. Below that, efficiency drops but still exceeds electric resistance heating.
Types of Heat Pumps
Air-Source Heat Pumps
The common variety. They extract heat from outdoor air.
Pros:
- Most affordable to install ($8,000-$15,000)
- Proven technology with decades of improvements
- Works in most climates with modern cold-climate models
- Replaces both furnace and AC
Cons:
- Efficiency drops in extreme cold (below 5°F)
- May need backup heat in coldest regions
- Outdoor unit creates some noise
Ground-Source (Geothermal) Heat Pumps
Extract heat from underground, where temperatures stay constant year-round.
Pros:
- Highest efficiency available (400-500%)
- Works in any climate
- No outdoor unit
- Extremely long lifespan (25+ years for inside components, 50+ for ground loops)
Cons:
- Very expensive ($20,000-$40,000+)
- Requires yard space for ground loops or drilling
- Complex installation
- Not practical for all properties
Mini-Split (Ductless) Heat Pumps
Individual wall units serving specific rooms.
Pros:
- No ductwork needed
- Zone heating and cooling
- Good for additions, older homes, or supplementing existing systems
- Lower cost for single-zone ($3,000-$5,000 installed)
Cons:
- Visible wall units
- Multiple units needed for whole-home
- Multi-zone systems can exceed central system costs
Do Heat Pumps Work in Cold Climates?
The old answer was "not really." Modern answer: mostly yes.
Cold-climate heat pumps from manufacturers like Mitsubishi, Fujitsu, Daikin, and Carrier maintain rated heating capacity down to -5°F to 5°F. Some models continue operating at reduced capacity to -15°F or colder.
In Minnesota, Maine, Vermont, Montana—heat pumps work. They're installed and operating right now in those states.
The practical considerations:
Design Temperature Matters
Your home has a design temperature—the coldest typical temperature for your area. If your design temperature is 0°F but your heat pump maintains capacity to 5°F, you might need backup heat for a few days per year.
Many homes in northern climates use heat pumps as the primary heating source with an existing furnace as backup. The heat pump handles 90%+ of heating hours, the furnace kicks in during extreme cold snaps.
Proper Sizing Is Critical
An undersized heat pump struggles in cold weather. An oversized heat pump short-cycles and reduces comfort. Getting sizing right requires proper calculations, not rules of thumb.
Insist on a Manual J load calculation. Any installer who sizes based on square footage alone doesn't know what they're doing.
Heat Pump Costs in 2025
| Type | Equipment + Installation | Notes |
|---|---|---|
| Central Air-Source | $8,000-$15,000 | Replaces furnace and AC |
| Cold-Climate Air-Source | $12,000-$20,000 | Premium models for harsh winters |
| Single-Zone Mini-Split | $3,000-$5,000 | One room/area |
| Multi-Zone Mini-Split | $10,000-$25,000 | Whole-home with multiple heads |
| Ground-Source (Geothermal) | $20,000-$40,000+ | Includes excavation/drilling |
These are before incentives. The federal tax credit (30%) and state/utility rebates can knock $5,000-$15,000 off.
The Federal Tax Credit
ENERGY STAR certified heat pumps qualify for a 30% federal tax credit, up to $2,000 per year. Cold-climate models get the full $2,000 credit. Standard models may get less.
If you spend $15,000 on a heat pump system, you get $2,000 back (capped). If you spend $8,000, you get $2,000 back. The credit is limited to $2,000 annually for heat pumps specifically.
This stacks with other energy credits up to a combined $3,200 annual limit for the 25C energy efficiency category.
Heat Pump vs. Furnace: The Real Comparison
Operating Costs
This depends heavily on local energy prices.
In areas where electricity costs $0.12/kWh or less, heat pumps almost always win on operating costs—often by 30-50%.
In areas where electricity costs $0.25/kWh or more, the comparison tightens. If natural gas is cheap, a high-efficiency furnace might cost less to run.
The math changes with heat pump efficiency. A 300% efficient heat pump uses 1 kWh to deliver 3 kWh of heat. Even at $0.20/kWh electricity, you're paying $0.067 per kWh of delivered heat. Compare that to gas at $1.50/therm (about $0.05 per kWh of heat from a 95% efficient furnace).
In most of the country, heat pumps win. But run the numbers for your specific rates.
Comfort
Gas furnaces deliver hot air in short, intense blasts. Heat pumps deliver warmer-than-room-temperature air continuously.
Some people prefer the hot blast. Others find continuous gentle warmth more comfortable. There's no objectively correct answer.
Modern heat pumps with variable-speed compressors maintain very consistent temperatures. Older single-stage systems have more temperature swing.
Longevity
Heat pumps run year-round (heating and cooling), so they accumulate more operating hours than a furnace. Typical lifespan:
- Air-source heat pump: 15-20 years
- Gas furnace: 15-25 years
- Air conditioner: 15-20 years
But a heat pump replaces both a furnace and an AC. When comparing apples to apples, the economics often favor heat pumps.
Is Your Home Ready?
Insulation First
Heat pumps work best in well-insulated homes. They deliver heat at lower temperatures than furnaces, so they need to run longer. Poor insulation means constantly fighting heat loss.
Before installing a heat pump, consider:
- Attic insulation (R-38 to R-60 recommended)
- Wall insulation where accessible
- Air sealing around windows, doors, and penetrations
- Duct sealing if using a ducted system
Money spent on insulation often has a faster payback than money spent on a bigger heat pump.
Electrical Capacity
Heat pumps are electric. Your home needs adequate electrical service. Most modern homes have 200-amp service and can handle a heat pump without upgrades.
Older homes with 100-amp or 60-amp service might need a panel upgrade ($1,500-$3,000). Factor this into your budget.
Existing Ductwork
Ducted heat pumps use your existing ducts. If your ducts are in poor condition, leaky, or poorly designed, you'll get poor performance.
A good installer evaluates duct condition. Some improvements might be needed—sealing, resizing, or adding runs.
If you don't have ductwork, consider ductless mini-splits or high-velocity systems designed for homes without ducts.
Finding a Qualified Installer
Heat pump installation is more complex than furnace installation. The stakes for getting it wrong are higher.
What to Look For
- Specific heat pump training and certification
- Experience with your chosen equipment brand
- Willingness to do Manual J load calculations
- Cold-climate experience if you're in a northern state
- References from heat pump installations (not just general HVAC)
Questions to Ask
- How many heat pump installations have you done in the last year?
- What sizing methodology do you use?
- How do you handle backup heat in cold climates?
- What's your warranty on installation work?
- Can I speak with recent heat pump customers?
Red Flags
- Sizing based on square footage alone
- Unfamiliarity with cold-climate models if you're in a cold area
- Pushing only one brand regardless of your needs
- Reluctance to discuss efficiency ratings and specifications
- No clear plan for backup heat in extreme cold
The Bottom Line
Heat pumps make sense for most homes in most climates. They're more efficient than gas furnaces, provide both heating and cooling, and qualify for substantial incentives.
They're not for everyone. If you have very cheap natural gas and expensive electricity, the operating cost advantage shrinks. If you're in extreme cold (below -10°F regularly), you'll likely need backup heat.
But for the vast majority of American homes, heat pumps are a smart choice. They cost more upfront than a basic furnace, but the 30% federal tax credit and operating savings often make the lifetime cost lower.
If your furnace is aging, your AC needs replacement, or you're building new—give heat pumps serious consideration. The technology has matured. The economics work. And you'll be set for decades.
Common Heat Pump Mistakes to Avoid
After covering hundreds of heat pump installations, patterns emerge. Here are the most expensive mistakes homeowners make:
Ignoring Insulation First
A heat pump in a poorly insulated home is like pouring water into a leaky bucket. You'll run the system constantly, drive up costs, and wonder why your neighbors love their heat pump while you're frustrated with yours. Address insulation before or alongside your heat pump installation.
Choosing Based on Price Alone
The cheapest quote is rarely the best value. Poor installation leads to premature failure, reduced efficiency, and comfort complaints. Pay for quality installation and you'll save over the system's lifetime. A $2,000 premium on installation can prevent $5,000 in repairs and inefficiency costs.
Skipping the Load Calculation
Manual J load calculations take time. Contractors who skip them are guessing at your system size. Wrong sizing means wrong performance—either struggling during extreme weather or short-cycling during mild conditions. Insist on proper calculations.
Not Understanding Auxiliary Heat
In cold climates, your heat pump will occasionally need backup heat. Electric resistance backup is included in most air handlers but is expensive to run. If you have natural gas available, a hybrid system using your existing furnace as backup often makes more economic sense. Discuss options with your installer.
Ignoring Maintenance Requirements
Heat pumps need annual maintenance to maintain efficiency. Dirty coils, clogged filters, and low refrigerant all reduce performance. Budget for an annual professional checkup—it pays for itself in efficiency and extended equipment life.
What the Installation Process Looks Like
Knowing what to expect reduces stress. Here's the typical timeline:
Week 1-2: Assessment and Quote
Contractor visits your home, evaluates existing systems, measures spaces, and performs load calculations. You receive a detailed proposal with equipment specifications, pricing, and timeline.
Week 3-4: Equipment Order and Permits
Once you accept a proposal, equipment is ordered and permits submitted. Most equipment ships within 1-2 weeks. Permits vary by jurisdiction from same-day to two weeks.
Installation Day 1
Crew arrives, removes old equipment, and installs the outdoor unit. Refrigerant lines are run between indoor and outdoor components. Indoor air handler is positioned and connected.
Installation Day 2
Electrical connections completed. Thermostat installed and configured. System charged with refrigerant and tested. Contractor walks you through operation and maintenance.
Week 5-6: Follow-up
Inspector visits to verify work meets code. You file any rebate paperwork. Track system performance over the first month and report any concerns to your contractor.
The best installations feel anticlimactic—equipment works quietly in the background and you simply enjoy comfortable temperatures without thinking about it. That's the goal.