Is a heat pump cheaper than heating oil?

On the US-average electricity rate a cold-climate ASHP (~$19.89/MMBtu effective) costs well under heating oil (~$47.06/MMBtu) while oil sits near $5.54/gal. In New England, where power runs ~$0.28/kWh, the ASHP is closer to ~$29/MMBtu, still below oil, but the gap narrows below 20°F as COP drops.

At what temperature does heating oil win?

Below ~15 to 20°F, COP on most ccASHPs falls under 2.0. Pure electric resistance backup kicks in, $/MMBtu spikes. Oil wins on the coldest 10 to 20 days.

Are there still federal tax credits for heat pumps?

The federal 25C credit (30% of cost up to $2,000) expired for installs after 31 December 2025 under the 2025 budget law, so it does not apply to a 2026 install. What remains for 2026 is the income-qualified federal HEAR rebate (up to $8,000) plus state programmes, which stack.

Should I keep oil as backup?

In Maine/Vermont/NH, yes. Dual-fuel (oil furnace as auto-switch backup) eliminates the resistance-electric tail.

Heating oil vs heat pump

ccASHP wins above 30°F. Oil wins below 15°F. Dual-fuel beats either alone in northern New England. NEEP

The bar chart (effective $/MMBtu)

Heating oil (#2)$47.06/MMBtu eff @ 85%

Propane$32.44/MMBtu eff @ 90%

Natural gas$16.96/MMBtu eff @ 92%

Kerosene (K-1)$54.38/MMBtu eff @ 85%

Heat pump (ccASHP)$19.89/MMBtu eff @ 280%

Basis: EIA national residential prices, March 2026 (heating oil and propane from the week of 2026-03-30 SHOPP survey; natural gas and electricity from the March 2026 monthly series). Electricity is the US average (~$0.19/kWh); New England runs higher (~$0.28/kWh), which lifts the heat-pump bar. Kerosene (K-1) is modeled as #2 oil plus a typical refining premium; EIA runs no weekly K-1 retail survey.

The COP curve, plain English

A cold-climate ASHP has Coefficient of Performance ~3.0 at 47°F, dropping to ~2.0 at 17°F, dropping to ~1.5 at 5°F. At COP 1.0 the heat pump becomes a resistance heater. NEEP's cold-climate spec list is the canonical reference. NEEP

Annual cost, 764 gal-equivalent (90 MMBtu useful) household

Oil only: 764 gal x $5.54/gal = $4233/yr.
ccASHP only: 90 MMBtu x $19.89/MMBtu = $1789/yr at the US-average $0.19/kWh. At New England's ~$0.28/kWh (EIA 2026) it is ~$2636/yr.
Dual-fuel (ASHP above 25°F, oil below): ~$2156/yr at the US-average rate.

Even at New England's much higher electricity rate, a ccASHP undercuts oil-only heat while oil sits near $5.54/gal. The margin narrows on the coldest single-digit weeks, when COP falls and dual-fuel earns its keep.

Rebates in 2026 (the 25C credit has expired)

The federal 25C tax credit (30% of cost, up to $2,000) expired for installs after 31 December 2025 under the 2025 budget law. A 2026 install does not qualify. What is left is the income-qualified federal HEAR rebate plus state programmes, which stack. State amounts change yearly and scale with income, so confirm the current figure with the programme before you budget:

Federal HEAR (income-qualified): up to $8,000 toward a heat pump for households at or below 150% of area median income.
Mass Save (MA): whole-home ASHP rebate is capped (about $8,500 in 2026), rising to $16,000 for income-qualified households.
NY State Clean Heat: administered through your electric utility on a per-kBtuh basis, up to about $12,000 depending on system size and utility.
Efficiency Vermont: roughly a few hundred to ~$2,200 per unit at standard income, about $3,000 per unit income-eligible, plus utility bonuses.
Efficiency Maine: $1,000 per unit at any income (up to $3,000 for three units), rising to $9,000 for income-qualified households.

Cross-references

EIA SHOPP last reading: 2026-11-02NY Harbor ULSD spot refreshed: 2026-11-05EIA next release: 2026-11-12