New gas furnace + new AC
- Installed
- $11,400$8,900–$13,800
- Energy per year
- $820Baseline
- 15-year total
- $23,700
- Payback
- Baseline
Heat pump or new furnace and AC?
For TEP (Tucson Electric Power) customers in Arizona, on the utility's current tariff, local weather and current rebates.
Electricity
16.0¢/kWh
+3% vs. Arizona average
Gas, winter
$1.78/therm
Arizona average (EIA)
Climate
1,249
heating degree days · Tucson Wfo HCN
Rebates
up to $720
TEP Efficient Home instant rebate
Our estimate for this home
It depends on your quotes
It depends on your quotes. A heat pump saves about $170 a year to run, so it comes out ahead over 15 years if its quote is no more than $3,200 above the quote for a new furnace and AC (counting about $725 in rebates; compare quotes before rebates).
Total cost over 15 years
Installed cost plus energy, year by year. Hover or tap the chart to compare.
- New gas furnace + new AC
- Heat pump (replaces both)
- High-efficiency cold-climate heat pump
Show as a table
| Option | Installed cost (typical, range, after rebates) | Energy cost per year | 15-year total | Payback vs. like-for-like |
|---|---|---|---|---|
| New gas furnace + new AC | $11,400 $8,900–$13,800 |
$820 |
$23,700 | Baseline |
| Heat pump (replaces both) Lowest 15-year cost | $10,600 $7,200–$14,100 after $725 rebate |
$650 saves $170/yr |
$20,400 | Cheaper up front and to run |
| High-efficiency cold-climate heat pump | $14,100 $10,100–$19,000 after $725 rebate |
$480 saves $340/yr |
$21,300 | 8.0 years |
What this is based on
- Electricity: Residential Electric Service TRRES (Single Phase) tariff for TEP (Tucson Electric Power), effective 2025-09-30, from the U.S. Utility Rate Database, applied tier by tier to the extra kWh.
- Weather: Tucson Wfo HCN (1,249 heating and 3,538 cooling degree days a year, 1991-2020).
- Gas: Arizona average residential price over the last five winter months (EIA), $1.78/therm.
- Arizona HVAC installer wages are 3% below the U.S. median (BLS), so installed prices are scaled by 0.99.
- Energy use for heating and cooling:
- New gas furnace + new AC: 3,973 kWh and 119 therms a year for heating and cooling
- Heat pump (replaces both): 4,295 kWh a year for heating and cooling
- High-efficiency cold-climate heat pump: 3,178 kWh a year for heating and cooling
Rebates
- TEP Efficient Home instant rebate
(amount not confirmed, valid to 2026-12-31)
Up to $720 instant rebate on an ENERGY STAR heat pump through a participating contractor when retiring an older unit; first come, first served. TEP's page was last updated about two years ago: confirm with TEP. - APS ended residential HVAC rebates on January 1, 2026. Efficiency Arizona's income-based HEAR rebates no longer cover gas-to-electric switches (since September 1, 2026). The federal 25C tax credit ended with 2025 installs.
How TEP (Tucson Electric Power)'s rates change the answer
TEP (Tucson Electric Power)'s electricity price for a typical home is 3% above the Arizona average ($0.160 vs. $0.155 per kWh). A heat pump moves your heating from gas to electricity, so the electricity price is the biggest single factor: calculators that use a state average can get the answer wrong for your utility. At these prices, a heat pump is cheaper to run for a typical home here.
How we calculate this
Heating and cooling need
Your home's yearly heating and cooling need comes from 1991-2020 NOAA climate normals for the nearest weather station, scaled by floor area and insulation level. If you know last winter's gas use, compare it with the therms in the energy-use list above.
Equipment efficiency
New furnace 95% AFUE; new AC SEER2 13.4; standard heat pump SEER2 15.2 / HSPF2 7.8; high-efficiency cold-climate heat pump SEER2 21.5 / HSPF2 10.6. Heat pump efficiency falls as it gets colder, and in cold months part of the heat comes from backup electric strips (or your old furnace, if you keep it). Existing equipment is assumed to be a 15-20 year old 80% furnace or SEER2 9.5 AC.
Installed costs
Installed prices vary a lot, so we show a typical price and a range for a home of about 1,800 sq ft with existing ductwork, scaled for larger or smaller homes: furnace and AC together $9,000–$14,000; furnace alone $3,800–$7,000; AC alone $4,500–$9,000; standard heat pump $8,000–$15,000; high-efficiency cold-climate heat pump $11,000–$20,000; electrical panel upgrade, if needed, $1,500–$4,000. These are national figures drawn from published studies and program data (NESCAUM / Energy Solutions, Heat Pumps in the Northeast and Mid-Atlantic: Costs and Market Trends (October 2024); Rewiring America, Upfront cost of home electrification (March 2024); EIA, Updated Buildings Sector Appliance and Equipment Costs and Efficiencies (2023)). The most useful number here is how much more a heat pump can cost than a like-for-like quote and still come out ahead: get quotes for both and compare.
Labor and rebates
Half of each installed price is treated as labor and scaled by the state's median HVAC installer wage relative to the U.S. median (U.S. Bureau of Labor Statistics). Listed rebates are subtracted when the box is ticked; per-ton rebates assume about one ton of capacity per 600 sq ft. Rebates change often and have eligibility rules, so confirm with the program before you buy.
Not included
Financing, maintenance (similar for all options), local town rebates, and changes in energy prices over time.