Heat Pump, Geothermal or Gas Furnace? A 2026 Guide for Decatur and Adams County Homes

Oct 27, 2026

When a furnace in Decatur starts to show its age, the question used to be simple: which gas furnace do we put in? Now there are more options on the table. Heat pumps have gotten much better in cold weather, geothermal keeps coming up in conversations around Adams County, and there are new discount programs to sort through. This guide lays out the choices honestly, using the utilities and programs that actually apply here.

Start with who supplies your energy

Most of the math depends on your utilities. According to the Adams County Economic Development Corporation, electric service in the county comes from Indiana Michigan Power (I&M, part of AEP), and natural gas comes from NIPSCO. Water and sewer are handled locally by Decatur, Berne, Monroe and Geneva.

That matters for two reasons. First, the rebate or discount programs you can use depend on your electric company. Second, comparing a gas furnace with an electric heat pump really comes down to your NIPSCO and I&M rates, so pull a winter bill from each before you decide anything. If your house is outside a gas service area and runs on propane or electric resistance heat, the comparison changes again, and usually in the heat pump’s favor.

Option 1: A new high-efficiency gas furnace

For a lot of Decatur homes already on NIPSCO gas, a new furnace is still the most familiar choice. It reuses your existing ductwork, gas line and venting, and it puts out very warm air on the coldest January mornings.

Good reasons to stay with gas:

Your ductwork and gas service are already in good shape.
Your central air conditioner is fairly new and you don’t want to replace it yet.
You want the lowest upfront cost and the least change to the house.

The trade-off is that a furnace only heats. Your AC is still a separate piece of equipment that will need replacing on its own timeline. Our furnace replacement page explains what we look at when sizing a new unit.

Option 2: An air-source heat pump

A heat pump is basically an air conditioner that can run in reverse. In summer it pulls heat out of the house, and in winter it pulls heat from the outdoor air and moves it inside. One outdoor unit handles both heating and cooling.

The older reputation of heat pumps struggling in Indiana winters came from older equipment. Today’s “cold climate” models are built to keep working at much lower outdoor temperatures. A common setup here is to pair a heat pump with a gas furnace (often called a dual-fuel or hybrid system), so the heat pump does most of the work in spring, fall and mild winter days, and the furnace takes over when it gets bitterly cold.

I&M instant discounts

I&M runs an Instant HVAC and Water Heating Discount Program. Instead of mailing in a rebate, the discount is taken off at the point of sale when you buy qualifying equipment from a participating contractor. Qualifying equipment and minimum efficiency listed by I&M include:

Air-source heat pumps: 15.2 SEER2
Cold climate heat pumps: 15.2 SEER2
Central air conditioners: 15.2 SEER2
Ductless heat pumps: 17 SEER2
Heat pump water heaters: 2.6 UEF
Wi-Fi enabled and ENERGY STAR smart thermostats

I&M does not publish the discount amounts on that page, and they can change. Before you sign anything, ask whether your contractor participates in the I&M program and have them show the discount on your quote.

Option 3: Geothermal

A geothermal (ground-source) heat pump uses loops buried in the yard instead of outdoor air. Because ground temperature stays fairly steady year-round, geothermal is one of the most efficient ways to heat and cool a home. Rural Adams County properties with room for a loop field are often good candidates.

The catch is upfront cost, mainly from drilling or trenching the loop. Two things changed recently that you should know about:

The 30% federal tax credit is gone for new projects. The IRS confirms the Residential Clean Energy Credit does not apply to expenditures made after December 31, 2025. If someone quotes you a geothermal system in 2026 with the federal credit built into the “net price,” ask them to explain it.
Geothermal is not on I&M’s instant discount list. The equipment listed above is air-source, ductless and water heating equipment.

Geothermal can still make sense for the right property, especially if you plan to stay a long time. Our geothermal service page covers installation, maintenance and repair.

State help: Indiana Energy Saver

Indiana’s Office of Energy Development runs the Indiana Energy Saver Program, which includes two federally funded rebates:

Home Appliance Rebates (HEAR) for low- and moderate-income households earning under 150% of the area median income. According to the program’s discount calculator, the maximum is $8,000 for an ENERGY STAR heat pump and $1,750 for a heat pump water heater, depending on household size and county income levels.
Home Efficiency Rebates (HOMES) for whole-home upgrades that are predicted to save at least 20% on energy.

The state is clear that you apply only through IndianaEnergySaver.com and that program contractors do not go door-to-door. If someone knocks on your door claiming to be from the program, that is a red flag.

How to decide

A few questions narrow it down quickly:

How old is your AC? If it is near the end of its life too, replacing both with a heat pump (alone or with a furnace backup) often makes more sense than two separate projects.
What do your bills say? Compare a winter NIPSCO bill to your I&M rate. That comparison drives operating cost more than anything else.
How long will you stay? Geothermal pays back over many years. A furnace or air-source heat pump is easier to justify on a shorter timeline.
What does your ductwork look like? Undersized or leaky ducts will hold back any new system.
Do you qualify for HEAR? Run the calculator before you decide. It can change the answer.

If you want help comparing two or three options side by side, our HVAC replacement team can quote them together so you can see the trade-offs on paper.

Frequently Asked Questions

Who supplies electricity and natural gas in Decatur and Adams County?

According to the Adams County Economic Development Corporation, electric service in the county comes from Indiana Michigan Power (I&M, part of AEP) and natural gas comes from NIPSCO. Your electric company decides which discount programs you can use, and comparing your NIPSCO and I&M rates is the best way to estimate what a furnace or heat pump will cost to run.

Does I&M offer discounts on heat pumps?

I&M runs an Instant HVAC and Water Heating Discount Program that takes the discount off at the point of sale when you buy qualifying equipment from a participating contractor. Listed minimums include 15.2 SEER2 for air-source and cold climate heat pumps and 17 SEER2 for ductless heat pumps. I&M doesn’t post the dollar amounts, so ask whether your contractor participates and have the discount shown on your quote.

Can I still get the federal tax credit for geothermal?

Not for new projects. The IRS says the Residential Clean Energy Credit, which covered geothermal heat pumps, isn’t allowed for expenditures made after December 31, 2025. If a 2026 geothermal quote shows a federal credit lowering the price, ask the contractor to explain it and check with your tax preparer.

Will a heat pump keep a Decatur home warm in January?

Today’s cold climate heat pumps are built to keep heating at much lower outdoor temperatures than older models. Many homeowners who want extra assurance pair a heat pump with a gas furnace in a dual-fuel setup, so the heat pump handles mild weather and the furnace takes over in the coldest stretches. Ductwork condition and proper sizing matter as much as the equipment.

What is the Indiana Energy Saver Program, and could I qualify?

It’s a state program run by the Indiana Office of Energy Development. Its HEAR rebates serve households earning under 150% of the area median income, with maximums of $8,000 for an ENERGY STAR heat pump and $1,750 for a heat pump water heater, depending on household size and county income. HOMES covers whole-home upgrades predicted to save at least 20%. Apply only through IndianaEnergySaver.com.

Talk it through with Summers of Decatur

From Decatur out to Berne, Monroe and Geneva, Summers of Decatur can look at your current system and lay out the furnace, heat pump and geothermal options honestly. We have been serving Decatur and Adams County since 1969. Call (260) 339-3439 to set up a visit.