Heat Pumps: 2-in-1 Climate Solutions for Your Home

The term "heat pump" can be a bit misleading. It might sound like it generates heat but it actually works as a cooling and heating machine.

If you use a furnace or boiler for heating and an air conditioner for cooling your home, consider replacing the whole system with a heat pump. It can effectively keep your home warm in winter and cool in summer while helping you save money and reduce your household carbon footprint.

By installing a heat pump, you can save 1-7 metric tons of carbon emissions every year. For reference, a US to Europe international flight adds 1 metric ton to your carbon footprint, and going vegan reduces your carbon footprint by 1 metric ton.

A heat pump can also help you save money. Replacing a fuel oil furnace with an air-source heat pump will save about $950 every year in utility bills.

How does a heat pump work?

A heat pump is similar to a refrigerator or an air conditioner. It extracts heat from a source like surrounding air or ground, amplifies it, and transfers it to where it is needed. This makes them more energy efficient and cheaper to run than conventional heating technologies like boilers or electric heaters.

Air-source heat pumps are the most common type of heat pump that uses surrounding air to heat your home in winter and cool it in summer. It has an indoor and outdoor unit connected by a refrigerant line.

In the winter, the outdoor unit pulls heat from the air outside your home and increases its temperature using a refrigerant coolant. This warm air is then pushed through your home using the indoor unit. In the summer, the heat pump absorbs the warm air in your room and transfers it outside while throwing cool and dehumidified air back into the room.

Another commonly used heat pump is a ground source heat pump that absorbs and transfers heat from the ground to your home and vice versa. They use buried pipes filled with water or a refrigerant to work.

If you live in an area where the temperature regularly falls near or below freezing, heat pumps may not be as effective as traditional boilers or electric heaters. Consider backup heating in those cases.

Air-source vs ground-source heat pumps

Cost is an important factor when choosing a heat pump. Ground-source systems are more expensive to install than air-source systems, but they're also more efficient and can save you money on energy costs. Air-source systems are easier to maintain and service but may require more regular maintenance because they're more exposed to the elements.

An air-source heat pump, including installation, can range from $6,500 - $13,500 while the ground-source heat pump can range between $9,000 - $26,000. Based on your location in the U.S. and household income, you might be eligible for certain tax credits that would bring down this cost.

What tax credits can you get for heat pumps?

A federal tax credit was introduced in 2023 that will cover 30% of the heat pump cost and installation. This is capped at $2000 per year. This can be used for other energy upgrade projects as well, and it resets annually. Any taxpayer would qualify for the federal tax credits.

There are statewide rebates that are available as well, which are dependent on the median household income in your state:

  • If your household income is less than 80% of your state’s median household income, you are eligible for 100 percent of the rebates available.
  • If your household income is 80% to 150 percent of your state’s median income, you are eligible for 50 percent of the rebates available.
  • If your household income is more than 150% of your state’s median income, you are not eligible for these rebates.
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