Air Source vs. Ground Source Heat Pumps: Costs, Performance, Climate Fit, and Savings

Meta description: Compare air-source vs ground-source (geothermal) heat pumps for U.S. homes—costs, efficiency, climate fit, incentives, and long-term savings to help choose the right system.

Heat pumps are rapidly replacing furnaces and central AC across the U.S., but choosing between an air-source heat pump and a ground-source (geothermal) system is not always straightforward. This guide compares costs, efficiency, comfort, climate fit, incentives, and installation to help homeowners decide which option delivers the best value.

Air Source Vs Ground Source Heat Pump: Key Differences

When comparing an air source vs ground source heat pump, the core distinction is where each system harvests thermal energy—outdoor air versus stable ground temperatures.

• Heat Source/Sink: Air-source taps outdoor air; ground-source uses the earth via buried loops.
• Efficiency: Ground-source systems typically achieve higher COP and steadier performance.
• Installed Cost: Air-source usually costs far less upfront; ground-source has high drilling/trenching costs.
• Operating Cost: Ground-source is often the cheapest to run; air-source varies with climate and electricity rates.
• Climate Fit: Cold-climate air-source models work in subzero temperatures; ground-source excels in all climates.
• Incentives: Both qualify for federal support; geothermal has a 30% uncapped federal tax credit.
• Space/Property: Air-source needs outdoor clearance; ground-source needs land access for loops or wells.

How Heat Pumps Work

Air-Source Heat Pumps (ASHP)

ASHPs move heat between indoor air and outdoor air using a refrigeration cycle. In winter, they pull heat from outside air; in summer, they act like central AC. Inverter-driven models modulate capacity to reduce cycling, maintain steady temperatures, and improve efficiency. New “cold-climate” ASHPs maintain useful output at 5°F or even lower.

Ground-Source (Geothermal) Heat Pumps (GSHP)

GSHPs move heat between indoor air and the ground using a buried closed loop (horizontal, vertical, or pond) or, less commonly, an open-loop groundwater system. Because soil temperatures below the frost line are stable, GSHPs maintain high efficiency in both heating and cooling, regardless of weather swings.

Efficiency, Comfort, And Performance

Heat pump efficiency is expressed differently by type and mode. Using the right metrics helps compare systems and predict energy bills.

Key Efficiency Metrics

• ASHP Cooling: SEER2 (seasonal efficiency); typical quality systems are SEER2 15–22.
• ASHP Heating: HSPF2 (seasonal heating efficiency); solid systems often rate HSPF2 8–10.
• GSHP Cooling: EER (steady-state); common ranges are EER 18–35 depending on loop and design.
• GSHP Heating: COP (coefficient of performance); typical seasonal COPs range from about 3.0–4.5.

Bottom line: Ground-source generally achieves higher seasonal efficiency, especially where outdoor air is very hot or very cold. Air-source efficiency is highly climate- and model-dependent, with modern cold-climate ASHPs narrowing the gap.

Cold-Climate Performance

Historically, air-source struggled in freezing weather. That changed with variable-speed compressors, vapor injection, and advanced controls. Cold-climate ASHPs can deliver meaningful heat at 5°F and below, often with only modest capacity drop. Backup electric resistance or dual-fuel strategies may still be used for extreme cold snaps.

GSHPs tap the earth, typically ~45–70°F at depth, so they avoid severe winter efficiency losses. This stable source temperature yields high heat output and low operating cost in cold climates without relying on backup heat.

Cooling, Humidity, And Comfort

Both ASHPs and GSHPs provide efficient cooling. GSHPs often deliver higher sensible and latent efficiency because the ground loop stays cooler than peak summer outdoor air. That can reduce compressor energy and improve dehumidification. Air-source systems still deliver excellent comfort if properly sized with good airflow and controls.

Costs: Equipment, Installation, And Operating

Upfront cost is the biggest practical difference in the air source vs ground source heat pump decision. Operating cost depends on climate, electricity rates, and fuel alternatives.

Typical Installed Costs

Actual costs vary by home size, ductwork condition, loop geology, and contractor rates. The ranges below reflect typical U.S. residential projects before incentives.

Why GSHP costs more: The heat pump unit is comparable to premium HVAC gear, but ground loops require specialized drilling, trenching, piping, and antifreeze, plus potential permitting.

Operating Cost Example

The example below uses a 36 MMBtu annual heating load (roughly a well-insulated 2,000–2,500 sq. ft. home in a moderate to cold climate). Assumptions are illustrative for comparison.

• Electricity: $0.16/kWh (rates vary widely by state)
• Natural Gas: $1.10/therm
• Propane: $2.50/gal; Heating Oil: $4.00/gal (illustrative)
• ASHP seasonal COP: 2.8; GSHP seasonal COP: 3.8
• Gas furnace efficiency: 90%; Oil furnace efficiency: 85%

Takeaway: GSHPs frequently beat all fuels on operating cost. ASHPs can beat propane, oil, and resistance heating almost everywhere, and may approach or beat gas depending on electric rates, climate, and model efficiency.

Maintenance And Lifespan

• ASHP: Outdoor units typically last 12–17 years. Routine coil cleaning, filter changes, and refrigerant checks are essential.
• GSHP: Indoor heat pump units often last 20–25 years; the buried ground loop can last 50+ years. Maintenance includes filters, loop fluid checks, and circulator pump service.

GSHPs place major components indoors, reducing weather-related degradation and outdoor noise.

Climate And Site Fit

Cold Climates

Choose a cold-climate ASHP with ample capacity at 5°F (or the local design temperature) and defrost strategies suited to humidity and frost. Many systems maintain high efficiency even below 0°F, especially in well-insulated homes. Dual-fuel or a modest electric strip can provide peace of mind for rare extremes.

GSHPs shine in cold regions because the ground loop avoids winter temperature swings. They deliver consistent, quiet heat without auxiliary strips, and they typically use less electricity per unit of heat than ASHPs in deep winter.

Hot-Humid And Mixed Climates

ASHPs are excellent in the Southeast and mixed climates, offering efficient cooling and heating shoulder-season savings. Variable-speed indoor blowers and enhanced dehumidification controls improve comfort. Coil maintenance is crucial in high-humidity regions.

GSHPs provide outstanding cooling efficiency in hot-humid zones because the ground loop stays cooler than peak outdoor air, reducing compressor work. They can also integrate with desuperheaters to preheat domestic hot water during cooling season.

Space, Soil, And Lot Constraints

• ASHP: Requires outdoor clearance for airflow and service, plus appropriate indoor space for air handler and ducts or wall-mounted cassettes.
• GSHP: Needs access for drilling or trenching. Vertical wells suit small lots; horizontal loops need more land. Soil thermal conductivity, bedrock depth, and groundwater affect loop design and cost.
• Noise: ASHP outdoor units typically 45–60 dB; GSHPs put compressors indoors, making yards quieter.

Incentives, Tax Credits, And Rebates In The U.S.

Federal, state, and utility incentives can substantially reduce upfront cost. Always verify current terms and eligibility before purchase.

• Federal 25C Energy Efficient Home Improvement Credit (ASHP): 30% of installed cost, up to $2,000 per year for qualifying air-source heat pumps. Available annually through 2032. May also include up to $600 for an electric panel upgrade.
• Federal 25D Residential Clean Energy Credit (GSHP): 30% of total installed cost for geothermal heat pumps meeting ENERGY STAR criteria. No dollar cap. Available through 2032, phasing down thereafter.
• High-Efficiency Electric Home Rebates (HEEHR): Income-based rebates authorized by the Inflation Reduction Act; state rollouts vary in 2025–2025. These may offer substantial point-of-sale discounts for heat pumps, electrical upgrades, and weatherization.
• Utility And State Rebates: Many programs offer $500–$2,000 for ASHPs and $2,000–$5,000+ for GSHPs; some states (e.g., in the Northeast) provide larger incentives for geothermal projects.

Stacking: In many cases, rebates can be combined with federal tax credits, though rules vary by program. Check documentation to avoid “double dipping” prohibitions or measure caps.

Resources: ENERGY STAR, DSIRE (state incentives), and U.S. DOE.

Environmental Impact And Refrigerants

Electrification reduces building emissions as the grid gets cleaner. The carbon impact of an air source vs ground source heat pump depends on electricity emissions in your region and system efficiency.

Illustrative Emissions Example

Using the 36 MMBtu heating example and a U.S. average grid signal of ~0.85 lb CO2/kWh (varies by region):

• ASHP (≈ 3,770 kWh): ≈ 3,200 lb CO2 (≈ 1.45 metric tons)
• GSHP (≈ 2,780 kWh): ≈ 2,360 lb CO2 (≈ 1.07 metric tons)
• Natural Gas (≈ 400 therms at 11.7 lb/therm): ≈ 4,680 lb CO2 (≈ 2.12 metric tons)

Takeaway: Even on an average grid, heat pumps can cut emissions versus gas, with GSHPs typically leading. In regions with cleaner electricity, emissions drop further for both systems.

Refrigerants And Global Warming Potential (GWP)

Most current systems use R-410A, a high-GWP refrigerant. Newer designs are transitioning to lower-GWP refrigerants such as R-32 and R-454B, reducing climate impact. Proper installation and leak testing are critical. End-of-life recovery further minimizes emissions.

Installation Best Practices

Regardless of type, performance hinges on correct design and commissioning. Skipping fundamentals can erase efficiency gains and comfort benefits.

Right-Size The System

• Request a Manual J load calculation to size capacity for heating and cooling peaks.
• Use Manual S for equipment selection and Manual D for duct design.
• Prefer variable-speed or multi-stage units to match part-load conditions and limit cycling.

Ductwork, Airflow, And Comfort

• Seal and insulate ducts; aim for proper static pressure and balanced airflow.
• Consider zoning, smart thermostats, or ductless heads for uneven loads or additions.
• Ensure adequate return air and filtration (MERV 8–13) without excessive pressure drop.

Ground Loop Design (GSHP)

• Select vertical loops for small lots or challenging soils; choose horizontal loops where land is available and soils conduct well.
• Confirm loop sizing with local thermal conductivity data. Under-sizing risks high energy use.
• Verify pressure testing, purge procedures, and antifreeze concentration for freeze protection.

Commissioning And Quality

• Verify refrigerant charge, superheat/subcooling, and blower setup.
• Calibrate controls for defrost (ASHP) and loop protections (GSHP).
• Document performance data at handoff; schedule maintenance reminders.

Look for contractors with NATE certification for ASHPs and IGSHPA accreditation for geothermal. Ask for references and detailed designs.

Decision Guide: Which One Makes Sense?

There is no universal winner in the air source vs ground source heat pump debate. The best choice depends on home, site, climate, and budget.

• Choose Air-Source If: Upfront budget is limited; property access is tight; existing ducts or ductless heads can be reused; electricity rates are moderate; the home is in a mild-to-cold climate with a cold-climate model; or a phased retrofit is needed.
• Choose Ground-Source If: Long-term ownership is likely; drilling or trenching is feasible; incentives are strong; electricity is relatively expensive; winters are very cold or summers are very hot; the homeowner values low noise and minimal outdoor equipment.
• New Construction Or Major Renovations: GSHP loops are easiest to install before landscaping; radiant floors pair well with water-to-water geothermal. ASHPs integrate smoothly with modern airtight envelopes and right-sized ducts.
• Dual-Fuel Options: In gas-centric markets, a cold-climate ASHP paired with an existing furnace can minimize gas use while retaining a backup for arctic events.

Common Questions

Can An Air-Source Heat Pump Replace A Gas Furnace?

Yes. A properly sized cold-climate ASHP can fully replace a furnace in many U.S. climates. In very cold regions, adding a small electric strip or retaining the furnace as backup can cover rare extremes while keeping everyday operation efficient.

How Do Payback Periods Compare?

ASHPs often pay back in 5–10 years when replacing oil, propane, or electric resistance, faster with incentives. GSHPs can pay back in 8–15+ years depending on drilling cost, utility rates, and incentives. Longer homeownership and high run-hours improve geothermal economics.

Will I Need Electrical Upgrades?

Possibly. Larger heat pumps or electric backup strips may need panel upgrades. The 25C credit can contribute up to $600 toward panel upgrades when installed with a qualifying heat pump. Plan electrical work early to avoid delays.

Are Ductless Mini-Splits A Good Alternative?

Yes. Ductless systems offer high efficiency, zoned comfort, and lower cost per zone. They are ideal for homes without ducts, additions, or targeted areas. Multi-zone systems can replace whole-home HVAC if properly designed and sized.

How Noisy Are These Systems?

Modern ASHP outdoor units are quiet, typically 45–60 dB at low to medium speeds. GSHPs place the compressor indoors, so outdoor noise is negligible; indoor sound is similar to a refrigerator or air handler at low speed.

What About Domestic Hot Water?

ASHPs can pair with heat pump water heaters for efficient hot water. Many GSHPs support a desuperheater, which recovers waste heat for water heating, particularly during cooling season, lowering water heating costs.

Quick Comparison At A Glance

Tips To Maximize Savings And Comfort

• Weatherize First: Air sealing and insulation lower load, allowing a smaller, cheaper heat pump that runs more efficiently.
• Pick Qualified Models: Look for ENERGY STAR and, in cold regions, models listed by programs such as NEEP’s cold climate database.
• Optimize Controls: Use setback schedules sparingly with heat pumps; long, steady runs often save more than deep setbacks.
• Keep Coils Clean: Outdoor coil cleaning (ASHP) and correct airflow reduce energy use and defrost frequency.
• Monitor With A Meter: Smart thermostats and plug-in monitors help verify performance and catch issues early.

Where To Learn More

For detailed incentives and equipment guidance, see ENERGY STAR, the DOE Energy Saver hub, and DSIRE for state and utility programs. Reviewing a few bids from certified installers helps confirm load calculations, system selection, and total cost after incentives.

With the right design and incentives, both air-source and ground-source heat pumps can cut energy bills, improve comfort, and lower emissions—making either a smart upgrade depending on the home and budget.