Geothermal Heat Pump Costs, Pros, and Cons

Considering a new HVAC system for your home? Geothermal heat pumps, which harness stable underground temperatures to heat and cool your home, are durable, clean, and increasingly popular. 

We’ll walk you through what a geothermal heat pump is, show you why it's so energy efficient, break down the installation cost, and give you a clear list of pros and cons to help you determine if a geothermal heat pump is the right long-term heating and cooling solution for your home.

What is a geothermal heat pump?

A geothermal heat pump is a two-in-one heating and cooling machine that moves heat between your home and the ground. 

If you’re familiar with an air source heat pump, which moves heat between your home and the outdoor air, the process is essentially the same with one key difference. While the air outside changes temperature significantly through the seasons, the temperature underground is relatively stable. Those stable temperatures are ones at which heat pumps can be highly efficient, so geothermal heat pumps are more efficient than air source heat pumps.

A geothermal heat pump system uses pipes or loops buried underground or underwater, vertically or horizontally (often depending on the available space). Fluid runs through them, absorbing or releasing heat.

The other components of a system are similar to those of a more traditional air source heat pump system. There’s an interior heat pump with a compressor, refrigerant gas or fluid, and a heat exchanger, followed by a distribution system to move the conditioned air throughout the house.

From energy.gov

Geothermal heat pumps are energy efficient

Geothermal heat pumps are more energy efficient than other heating and cooling systems, including standard air-source heat pumps. A geothermal heat pump system can also be used for home water heating, further increasing energy efficiency. 

Energy Star, run by the US Environmental Protection Agency, reports a geothermal heat pump with Energy Star certification uses an average of 61% less energy than a standard heat pump and saves users about $830 a year. 

A system can reach 300%- 600% energy efficiency, or put out 3-6 the amount of energy in heat as the energy it consumes.

Geothermal heat pump cost and incentives

The full cost of a geothermal heat pump varies. The actual components of a system are only part of the expense. The installation is the larger portion of the cost. A new system, including installation, can cost up to $50,000 according to online retail sources. 

Actual cost will depend on a multitude of factors. Whether the external loop is horizontal or vertical will impact the cost of installation. The size of the home and property, too high of a water table, special soil or excavation needs, zoning and permit requirements, and labor costs can also affect the overall cost.

While a federal tax credit for purchased geothermal heat pumps expired at the end of 2025, local or utility incentives may still exist.

If the upfront cost of a geothermal heat pump is a barrier to adopting the technology you want, a heat pump lease can swap the upfront cost of purchase and installation with the predictable monthly payments that cover both, along with annual maintenance. Companies are starting to offer leasing options for geothermal systems.

Geothermal heat pumps pros and cons

If you’re considering a geothermal heat pump for your home, you want to weigh the pros and cons. 

Geothermal heat pump pros

• Superior energy efficiency compared to standard heat pumps, furnaces, and other HVAC systems
• Efficiency and reliability in extreme temperatures
• Durable through bad weather conditions
• It’s possible to have heating, cooling, and water heating in the same system
• Reduced carbon footprint
• Quiet
• Long lifespan, 20-25 years for the heat pump and up to 50 years for the underground loop

Geothermal heat pump cons

• The upfront and installation expenses (unless leasing)
• Greater space requirements for installation

Is a geothermal heat pump right for you?

You should decide whether a geothermal heat pump is the right choice for you alongside a qualified local HVAC expert. Here are some circumstances when a geothermal system could be a good fit. 

• When your area has extreme temperatures, hot and/or cold, and you see higher utility bills during those stretches
• You have the available land
• You want a heating, cooling, and water heating system with less maintenance
• You want to decrease your home’s fossil fuel consumption

To learn more about what you could save with home energy upgrades, download the new Palmetto App. You can track your energy usage, explore energy savings for your home, and earn real discounts on energy-saving devices in the app’s shop. You can also use Palmetto's Savings Maximizer to explore ways to save energy and money. 

Frequently asked questions

Is a geothermal heat pump worth it?

The cost to install geothermal HVAC can be worth it for your home heating and cooling. It can deliver highly efficient heating and cooling. 

How much do geothermal heat pumps cost?

Geothermal heat pumps generally are a major expense. The installation, with the labor, excavation, and other work to land or property, is a large portion of the total cost. A new system can cost up to $50,000 based on a survey of retail sources. 

Is a geothermal heat pump right for all climates?

Geothermal heat pumps work in all climates. Work with a knowledgeable local HVAC expert to determine whether a geothermal heat pump is the right fit for your home.

Disclaimer: This content is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.