New Furnace and AC Cost in Indianapolis: 2026 Complete Guide

A new furnace and AC together cost $6,500 to $13,500 fully installed in Indianapolis for a matched central air conditioner and gas furnace on a home with existing ductwork. Most Marion County homeowners replacing a 15-to-20-year-old system land in the $8,500 to $11,000 range for a mid-efficiency combination — 16 SEER2 cooling and 96% AFUE heating. This guide breaks down every cost driver, explains the repair-vs.-replace math on furnace repair cost, and covers the newer scenario Indianapolis homeowners are increasingly asking about: converting an oil furnace to an electric heat pump.

If you want installed quotes from vetted local contractors without the research, request free quotes from pre-screened Indianapolis HVAC contractors here.

New Furnace and AC Cost: What Indianapolis Homeowners Pay

The all-in price for a new furnace and AC in Indianapolis depends on three variables: the equipment tier you choose, your home's size (which determines tonnage and BTU capacity), and the condition of your existing ductwork and electrical infrastructure. Here's where projects actually land:

These figures reflect installed cost — equipment, labor, refrigerant, permits, and startup — for a Central Indiana home. They do not reflect net cost after rebates and tax credits, which are covered in a dedicated section below and can reduce your out-of-pocket number by $600 to $2,000 depending on equipment selected.

Is It Cheaper to Replace the Furnace and AC Together?

Yes, in almost every case. Replacing both units in a single project saves $800 to $1,800 compared to scheduling two separate installations. Here's why the math works:

• One mobilization: Labor for a dual replacement is not simply double the labor for a single unit. The contractor is already on-site, tools are already staged, and the permit covers both pieces of equipment.
• One permit pull: Marion, Hamilton, and Hendricks county mechanical permits cover the scope of a project. Two projects equal two permits — each costing $75 to $200.
• One refrigerant handling charge: EPA 608-compliant refrigerant recovery and recharge is billed per service call. Combining projects eliminates the duplicate charge.
• Matched-system efficiency: A new high-efficiency AC connected to a new variable-speed air handler delivers the efficiency rating on the label. That same AC connected to an aging single-speed air handler does not — and may void the manufacturer's warranty on the new equipment (ACCA standards guidance).

The exception: if your furnace is only 5 to 8 years old and in verified good condition, replacing it purely for bundling convenience doesn't pencil out. Have a licensed contractor assess remaining useful life before committing to a full replacement.

AC and Furnace Replacement Cost by Equipment Tier

The furnace and air conditioner replacement cost difference between entry-level and premium equipment is real — but so is the payback. Here's how the tiers break down for a 3-ton / 80,000 BTU system, the most common configuration for a 1,600–2,200 sq ft Indianapolis home:

Entry-Level Tier

AC: 14.3 SEER2 single-stage · Furnace: 80% AFUE single-stage
Installed cost: $6,500–$9,000. These systems meet minimum federal efficiency standards effective January 2023 for the North climate zone. They cool and heat reliably but cycle on and off at full capacity — less precise comfort control and somewhat higher operating costs than two-stage or variable systems. Best for homeowners with shorter planning horizons or tighter budgets.

Mid-Range Tier

AC: 16–17 SEER2 two-stage · Furnace: 96% AFUE two-stage
Installed cost: $8,500–$12,000. This is where most Indianapolis replacement projects land. Two-stage operation means the system runs at lower capacity (65–70%) most of the time, cycling up to full capacity only on the hottest and coldest days. The result is longer run cycles, better humidity control in summer, more even temperatures, and meaningfully lower utility bills. A 96% AFUE furnace wastes only 4 cents of every dollar of gas burned, compared to 20 cents for an 80% unit.

Premium Tier

AC: 18–21 SEER2 variable-speed · Furnace: 96–98% AFUE variable-speed
Installed cost: $11,000–$16,000. Variable-speed equipment modulates output continuously rather than switching between two stages. The benefits are significant: near-perfect humidity control, whisper-quiet operation, the tightest temperature consistency, and the lowest operating costs of any gas-plus-electric combination. Variable-speed systems also tend to qualify for the highest manufacturer rebates and the federal Section 25C tax credit.

For a deeper comparison of system types and brands, see our best heating and cooling systems guide.

How Much Does Furnace Repair Cost — and When Should You Replace?

Furnace repair cost in Indianapolis ranges from $120 to $3,500 depending on the failed component. The diagnostic service call itself typically runs $85 to $150, which is usually credited toward the repair if you proceed. Here are the most common furnace repairs and what they cost in this market:

The Repair-vs.-Replace Decision Rule

The U.S. Department of Energy's standard benchmark: if a repair costs more than 50% of a new system's installed price, and the furnace is over 10 years old, replacement is typically the better financial decision (energy.gov). Applied to Indianapolis numbers: if your furnace is 12 years old and a heat exchanger replacement quote is $2,200, and a new furnace installs for $3,900, the repair-to-replacement cost ratio is 56% — replacement wins.

A cracked heat exchanger is also a safety issue independent of the cost math. A failed heat exchanger can allow combustion gases — including carbon monoxide — to enter the home's air supply. Any contractor who diagnoses a cracked heat exchanger should recommend immediate system shutdown, not a repair-and-monitor approach, until the issue is fully resolved.

The other major trigger for replacement over repair: refrigerant leaks on a pre-2023 AC that still uses R-22 refrigerant (Freon). R-22 has been phased out under EPA regulations and costs $100 to $200 per pound when available at all. If your AC is R-22 and leaking, replacement is virtually always the right call.

What Drives HVAC and Furnace Replacement Cost Up or Down?

The spread between the low and high ends of HVAC and furnace replacement cost is wide — and it's not random. These are the specific factors that move your project toward one end or the other:

Converting an Oil Furnace to Electric Heat Pump: What Does It Cost?

A small but growing number of Indianapolis-area homes — particularly older properties in Meridian-Kessler, Broad Ripple, and Butler-Tarkington — still heat with oil furnaces. Converting an oil furnace to an electric heat pump is a more complex project than a standard gas furnace replacement, but it's increasingly cost-competitive thanks to federal incentives and falling heat pump equipment prices.

The total cost of converting an oil furnace to an electric heat pump in Indianapolis breaks into three components:

• Heat pump installation: A ducted air-source heat pump sized for the home runs $6,500 to $14,000 installed, depending on system capacity and efficiency tier. Cold-climate models from Carrier, Trane, Bosch, and Mitsubishi maintain full heating capacity at outdoor temperatures of 0°F to -13°F — more than sufficient for Indianapolis winters, where temperatures below 0°F are rare (National Weather Service Indianapolis climate data).
• Oil system decommissioning: Removing the oil furnace, decommissioning the oil tank (above-ground tanks typically run $300 to $600 to remove; underground tanks are significantly more complex and expensive), and capping or repurposing the flue stack adds $500 to $2,000 depending on tank location and size.
• Electrical upgrades: Homes with oil heat often have older electrical panels. A heat pump requires a dedicated 240V circuit; if the panel needs an upgrade to accommodate it, expect an additional $800 to $2,500.

Total all-in conversion cost: $8,000 to $17,500 in most Indianapolis-area scenarios. Before netting out incentives.

The federal Section 25C Energy Efficient Home Improvement Credit covers 30% of heat pump equipment and installation cost, up to $2,000 per year — making a qualifying cold-climate heat pump the most incentivized equipment category in the 2026 tax code (IRS.gov — 25C Credit). If your household is income-qualified, the Inflation Reduction Act's High-Efficiency Electric Home Rebate Act (HEEHRA) program may provide additional point-of-sale rebates through Indiana's state energy office — check current availability at in.gov/oed.

New Furnace and AC at Home Depot vs. Local Contractors: What's the Difference?

Home Depot does sell HVAC equipment in the Indianapolis market and offers installation through third-party contractors. For homeowners who have researched this path, here's the honest comparison:

Equipment Pricing

Retail HVAC equipment at Home Depot carries a retail markup over the wholesale pricing that licensed local HVAC contractors access through their distributor relationships with Carrier, Lennox, Trane, Rheem, and others. The same furnace or AC unit that a local contractor purchases wholesale may cost 15% to 25% more at retail before installation is factored in. The all-in installed price from a competitive local contractor typically matches or beats the Home Depot installed total for equivalent equipment.

Installation and Accountability

Home Depot's installation is performed by third-party contractors, not Home Depot employees. The quality of that contractor relationship varies by market and contractor availability. With a direct local contractor relationship, you have a named company — verifiable at in.gov/pla and the Better Business Bureau Indiana — that you can hold accountable through Indiana's contractor licensing system if issues arise post-installation.

The Bottom Line

Retail purchase of HVAC equipment can make sense in specific scenarios — primarily when a homeowner is comfortable sourcing equipment independently and has a licensed contractor lined up for installation. For most Indianapolis homeowners, getting competitive quotes from two to three vetted local contractors delivers better equipment pricing, clearer accountability, and equivalent or better warranty support.

Rebates and Tax Credits Available in 2026

Several incentive programs reduce the net furnace and AC replacement cost for Indianapolis homeowners this year:

• IRS Section 25C — Energy Efficient Home Improvement Credit: 30% of equipment cost, capped at $600 for qualifying central AC; up to $2,000 for qualifying heat pumps. Must meet ENERGY STAR Most Efficient 2026 criteria. File IRS Form 5695 with your return (irs.gov).
• AES Indiana equipment rebates: $50 to $250 for qualifying high-efficiency central AC or heat pump installations. Verify current tier amounts before purchase at aesindianarebates.com. Contractor typically submits on your behalf.
• Manufacturer promotional rebates: Carrier, Lennox, Trane, Rheem, and Daikin run seasonal promotions of $100 to $600 on qualifying matched systems. Ask your contractor what current promotions apply to the equipment being quoted — these are time-limited and model-specific.
• Utility financing: AES Indiana and Centerpoint Energy (gas service in many Indianapolis neighborhoods) periodically offer 0% or low-interest financing for qualifying energy-efficiency upgrades. Check current program status directly with your utility provider.

For a broader look at heat pump cost and related incentives, see our heat pump cost guide.

References: U.S. Department of Energy — Central Air Conditioning · U.S. Department of Energy — Hiring a Contractor · IRS — Energy Efficient Home Improvement Credit (25C) · IRS — Residential Clean Energy Credit (25D) · AES Indiana Rebates Program · ACCA Manual J Load Calculation Standard · Indiana Professional Licensing Agency · Indiana Office of Energy Development · Better Business Bureau Indiana · National Weather Service Indianapolis — Climate Data