Heat Pumps in 2025: The Economics Have Shifted
Heat pump efficiency is measured in COP (Coefficient of Performance) — the ratio of heat produced to electricity consumed. Modern air-source heat pumps achieve COP 2.5–4.0 in moderate temperatures. At COP 3.0, a heat pump delivers 3 units of heat per unit of electricity consumed. Compare this to a 95% AFUE gas furnace that delivers 0.95 units of heat per unit of gas. At national average prices ($0.16/kWh electricity, $1.40/therm gas), a heat pump at COP 3.0 costs about $0.053/kBTU delivered heat. A 95% furnace costs about $0.149/kBTU. The heat pump is 2.8× cheaper per unit of heat — even accounting for higher electricity rates than gas.
Cold Climate Performance: The Old Limitation Is Largely Resolved
The historical knock on heat pumps — that they lose effectiveness below 32°F — applies to 2005-era equipment. Modern cold-climate heat pumps (Mitsubishi H2i, Bosch Climate 5000, LG Therma V) maintain COP greater than 1.5 at 0°F and some are rated to -13°F. This matters enormously in climate zones 5–7 (New England, Upper Midwest, Mountain states). The crossover point — where a heat pump's efficiency advantage over gas disappears — has shifted from roughly 20°F in older units to below -5°F in current cold-climate models. For most of the U.S. heating season, modern heat pumps maintain their efficiency advantage throughout.
Boilers vs Forced Air: Distribution System Compatibility
Heat pumps work best with forced-air distribution systems (ductwork). Homes with hot-water baseboard or radiator systems (typical in Northeast cities and older construction) face a compatibility challenge. Hydronic (water-based) heat pumps exist but cost 30–50% more than air-to-air systems. Mini-split heat pumps bypass the ductwork issue entirely by delivering heat directly to zones — often the most practical heat pump solution for homes with boilers. Installing 3–4 mini-splits throughout a home ($15,000–$25,000) provides both heating and cooling without touching existing boiler or ductwork.
The IRA Tax Credit Changes the Calculus
The Inflation Reduction Act (2022) used to provide a 30% tax credit (up to $2,000) for qualifying heat pump installations, but that credit was terminated by the One Big Beautiful Bill Act for anything placed in service after December 31, 2025 — it doesn't apply in 2026. Low-to-moderate income households may still qualify for HEEHRA rebates up to $8,000, a separate program that survived. A heat pump installation that costs $12,000 now nets to roughly $4,000 after HEEHRA rebates alone for eligible households, or the full $12,000 for households that don't qualify. Payback periods are longer than they were with the federal credit — often 8–12 years versus 5–8 years when the credit was still available, particularly when replacing an aging gas system.