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Heat Pumps Can Keep Your Home Warm and Cool. Should You Get One?

New tech and tax rebates make these environmentally friendly devices more affordable

​Heat pumps are having a moment. They aren’t used much in the U.S. — yet — but they are more efficient than traditional gas furnaces and better for the environment. And despite the name, heat pumps can be used to provide both warmth and cooling. ​

Matt Bowers, 43, lives in a 2,800-square-foot house in Rochester, New York. He heats his home, he says, “with the same amount of electricity that’s put out by a hair dryer.” The yearly heating portion of his electric bill is approximately $250, about what it costs, on average, to heat most U.S. homes for just two months. Bowers, who is the owner of Rochester Passive House Consulting, uses an air source heat pump to heat and cool his home. ​

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Although Bowers’ home was already built to ultra-energy-efficient Passive House standards, anyone using a heat pump should see dramatic savings on their home energy bills, according to the American Council for Energy Efficient Economy (ACEEE). That’s because today’s heat pumps are 2.2 to 4.5 times more efficient than traditional gas furnaces, according to a recent report from consulting firm McKinsey on building decarbonization. ​

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Heat pumps also are quiet, offer more control than a gas furnace and are being touted as one of the best ways to help fight climate change, since they run on electricity and don’t give off carbon dioxide and carbon monoxide (as fossil-fuel-burning gas furnaces do). Plus, recent federal legislation provides tax credits of up to $2,000 to get people to make the switch, and state rebates can sweeten the deal (see box below for more information).​

Sound too good? “There aren’t a lot of drawbacks to owning a heat pump,” says Amber Wood, director, buildings program, ACEEE. She acknowledges that in the past, there were complaints about noise levels, or that heat pumps don’t work well in cold climates or that they don’t raise the temperature high enough. But new technology has overcome those challenges, she says. ​

It is true, though, that if you live in a region where it can be extremely cold for long periods of time, your heat pump might not be able to keep up with the heat loss from the structure itself, and you’d need a backup heat source powered by gas or electricity that kicks in quickly. ​

In any case, if your house is drafty or poorly insulated, a heat pump probably shouldn’t be your first line of defense. You need to take care of those issues first before you invest in either a heat pump or a traditional heating system. In addition, Wood says, if your house is properly weatherized, “you can likely install a smaller system — another place to find savings.” ​

Today only about 14 percent of homes nationwide use heat pumps. But concerns about the climate and a host of government incentives mean that could change. And in some states, such as Washington, heat pumps are now mandated for all new residential construction (with an allowance for gas use for backup heating in extreme cold). ​

How does a heat pump work?

Think of a heat pump like an air conditioner that can blow hot air as well as cold. ​

A heat pump draws heat either from outdoor air or from underground, depending on the type of system you have—regardless of the season. The air is run across a refrigerant, which, when compressed, gets superhot or, when depressurized, gets cold. ​

The most common system is an air source heat pump (ASHP), which has an exterior unit (similar to a central air-conditioning unit) that connects via a tubing system to one or more indoor air handlers or “heads.” A ground source heat pump (GSHP) does similar work but pulls heat from the ground instead of the outside air.​

How does the air get into the house? 

Heat pumps feed warm air into your home either with or without ductwork. Homeowners with a traditional furnace can use the ductwork they already have in place with a heat pump. ​

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With a ductless system, air-handling units are positioned throughout a home: on a wall, recessed in the ceiling, mounted on the floor. These are connected by tubing to the exterior unit.​

Why is a heat pump so efficient? 

Unlike a furnace, “heat pumps are not creating heat. They’re moving heat,” says Chad Gillespie, senior manager, performance construction, at Mitsubishi Electric Trane HVAC U.S. Even the most efficient gas furnace doesn’t turn 100 percent of its fuel into heat, but a heat pump is more than 100 percent efficient; it can transfer three times more heat energy to a home than the electrical energy it consumes. ​

And heat pumps have variable speeds. In other words, a heat pump doesn’t shut down and wait for directions from your thermostat. It recognizes when you need cooler or warmer indoor air, making the whole system more consistent—and more efficient as a result.​

What are the costs for a heat pump? 

An air source heat pump (non-ducted) system generally costs several thousand dollars, and the cost may be higher depending on each home’s setup. Your initial purchase includes the outdoor unit, the refrigerant line and one indoor air handler or head. If you have a large home, perhaps 2,600 to 3,000 square feet, additional air handlers will run a few thousand dollars each. And if you live in a very cold climate, a whole-house heat pump package can cost more than $10,000. ​

If you already have ducts, the system will be slightly different and you might be able to use the ducts in place. “But whatever system you buy has to be customized for your house, its size and construction,” Wood says.​

A heat pump system may seem expensive when compared with the costs of a traditional gas furnace, which according to HomeAdvisor ranges from $3,800 to $10,000 with installation. HomeAdvisor also reports that installation of an electric furnace ranges from $2,000 to $7,000, and oil furnaces cost $6,750 to $10,000 or more with installation. ​

But remember that a heat pump provides cooling too, and your long-term savings can offset the upfront costs. A heat pump can save a homeowner, on average, about $950 a year compared to oil heat, or about $459 when compared to electric resistance heaters, according to the U.S. Department of Energy. ​

In addition, there are lots of federal tax credits and state rebates available for those switching to a heat pump. As part of the Inflation Reduction Act (IRA) of 2022, depending on when you make the purchase, you could take a tax credit of between $300 and $2,000 and receive a state rebate of up to $14,000 depending on your income (see box for more information). ​

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“Speak with your contractor and tax preparer to make sure what’s accurate for your locale,” advises Dan Wildenhaus, senior technical manager at the Center for Energy and Environment. Signed into law on August 16, the IRA’s changes to residential energy-efficiency tax credits become effective this year.​

Another resource is, the Database of State Incentives for Renewables & Efficiency. Type in your zip code to find information on local and national tax credits and rebates. ​

Heat pump considerations

1. The strength of the heat

Heat pumps were once known as not being able to provide enough heat in really cold climates, but technology has improved. However, if your house is drafty or not well insulated, a heat pump — or a new furnace, for that matter — is not going to solve your problems. “People have a negative opinion about heat pumps from the early ’80s and ’90s, when they didn’t put out a lot of heat. Today they put out a lot more heat,” Gillespie says. “Old heat pumps would not heat below 40 to 47 degrees because they didn’t have the right engine to do so.”​

But “technology has come a long way in the last 10 to 15 years,” Bowers says. “They absolutely can be used in colder regions; there are heat pumps that will put out full heating capacity down to minus 14 degrees Fahrenheit.” ​

2. Heat pump air may seem cooler on your skin 

A gas furnace produces air that’s about 140 degrees. A heat pump produces air that’s around 125 degrees, so a room might feel cool if you’re used to the type of warmth emitted by a radiator or traditional system. But as Bowers points out, “you don’t necessarily want air to be blowing out at 140 degrees. If the temperature is too hot, you can actually start to smolder dust particles, and you may get a burning smell near the heat registers. With an air source heat pump, the air is 120 to 125 degrees so you’re not smoldering dust particles.” ​

Many older adults tend to be sensitive to cold temperatures, and they prefer their living spaces to be as warm as 75 or 80 degrees. A heat pump is able to get the temperature up that high. You can set the temperature using a programmable thermostat, for example. The heat pump can automatically shift from air-conditioning to heat depending on the temperature. And because heat pumps distribute heat evenly throughout the house, you shouldn’t feel cold spots.​

 3. Maintenance costs and insulation

Just like with a furnace, the indoor heads of a ducted or ductless system need their filters changed and cleaned about two to three times a year. “Usually they’re washable, so you don’t have to buy new ones each time,” Bowers says. ​

Ultimately, it’s about overall comfort in your home. But before you switch out one heating system for another, it’s important to do air sealing and take other weatherization measures to ensure your home is not drafty. As Bowers puts it, “A wise man once said, ‘You pay for insulation whether you have it or not.’ ”​ ​

Tax Credits for Heat Pump Installation

If you’re considering making a switch to a heat pump for heating and cooling your home, there are federal tax credits for energy efficiency, known as 25C, and state rebates available to make it more affordable. These are part of the federal Inflation Reduction Act passed in August 2022.​

Energy Efficient Home Improvement (25C) Tax Credit​

  • Heat pumps installed during 2022 that are Energy Star certified meet the requirements for the 25C tax credit of $300. ​
  • For equipment installed on Jan. 1, 2023, or later, households can deduct 30 percent of the costs for buying and installing a qualified heat pump, up to $2,000 if the heat pump system meets or exceeds the highest performance tier set by the Consortium for Energy Efficiency (CEE). ​​

High-Efficiency Electric Home Rebate Act​

  • This is a 10-year program, administered through state energy offices, to support low- and moderate-income households. ​
  • The act allocates $4.3 billion to states to pass on to homeowners for home energy improvement projects, including point-of-sale heat pump rebates.​
  • State rebate programs depend on income and are available to households earning less than 150 percent of their area’s median income. If your household income is less than 80 percent of your state’s median household income, you are eligible for 100 percent of the cost of upgrades up to $14,000.​

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