A new gas furnace installation in the Bay Area runs $4,200 to $9,500 in 2026 for a typical 80,000-100,000 BTU residential furnace, depending on AFUE efficiency tier and any required gas line or venting work. Heat pump conversion (replacing the furnace + AC with a single all-electric system) runs $11,000-$22,000 but qualifies for substantial federal and state incentives that often bring net cost below a comparable gas + AC combo. This guide details every line item with real Silicon Valley pricing.
Gas Furnace Pricing by Efficiency Tier
California has two main gas furnace efficiency tiers in residential use: 80% AFUE (atmospheric or induced-draft, B-vent) and 95-98% AFUE (condensing, PVC vent). The federal minimum is 80% AFUE, and California has not mandated 95% statewide — but several cities (notably Berkeley) have moved toward all-electric reach codes that effectively phase out gas furnaces in new construction.
80% AFUE single-stage furnaces are the entry tier — appropriate for budget-conscious replacements where the existing chimney venting is intact. Brands include Goodman GMVC8, Lennox ML195, Carrier 58STA, Bryant 925SA, Rheem Classic. Installed pricing for an 80,000 BTU unit: $4,200-$6,200. These run at full output whenever heating is needed.
95-98% AFUE two-stage condensing furnaces are the current sweet spot for new installations. Brands include Carrier Infinity 59MN7, Trane S9V2, Lennox SLP99V, Goodman GMVC96, Bryant Evolution 987M. Installed: $5,800-$8,500. The condensing design extracts more heat from combustion gases and vents through PVC instead of B-vent — but requires a condensate drain.
Modulating variable-speed condensing furnaces (95-98% AFUE) modulate output continuously like variable-speed AC, providing the smoothest comfort. Brands include Carrier Infinity 59TN6, Trane XV80, Lennox SLP99UH (paired). Installed: $7,500-$9,500. Best paired with variable-speed AC for whole-system modulation.
What's Included in a Furnace Replacement
A complete gas furnace replacement covers more than just swapping the cabinet. Our quotes itemize:
- •Removal and recycling of old furnace per CalRecycle requirements
- •New furnace cabinet (80% or 95% AFUE) sized to existing or recalculated load
- •Gas line resizing if BTU input changes significantly
- •Venting: B-vent retention or PVC sleeve through chimney for condensing models
- •Combustion air provisions
- •Condensate drain to laundry sink, floor drain, or condensate pump
- •New thermostat (basic programmable included; smart upgrade extra)
- •New thermostat wire if existing is incompatible (4-wire common, 5-wire for variable-speed)
- •Gas leak test on all new connections
- •Combustion analysis with CO testing on first startup
- •California Title 24 documentation
- •Building permit pull and inspection scheduling
- •2-year labor warranty + manufacturer parts warranty (5-10 years)
Heat Pump Conversion vs Gas Furnace Replacement
The 2026 economics increasingly favor heat pump conversion over straight gas furnace replacement for Bay Area homes. Here's the math:
A typical mid-tier 95% AFUE gas furnace + 17 SEER2 AC combo runs $13,500-$18,500 installed before incentives. After IRA 25C credits ($600 furnace + $600 AC = $1,200 max), net cost is $12,300-$17,300.
A comparable 3-ton heat pump installation runs $14,500-$22,000 installed before incentives. After IRA 25C ($2,000 heat pump credit) + TECH Clean California ($1,000-$3,000) + PG&E ($500-$1,500) + SVCE/PCE ($500-$1,500), net cost is $7,500-$15,000.
Operating cost in the Bay Area mild climate also typically favors heat pump — natural gas at PG&E's G-1 rate has risen substantially over the past 5 years, while electric rates from SVCE and PCE are stable to declining for green tariffs. The crossover point is around 3-5 years of operation.
Caveats: heat pump conversion may require electrical panel upgrade if your panel is at capacity, adding $2,800-$6,500. Some older homes have undersized service that wouldn't support heat pump conversion without major electrical work. We assess this during the in-home estimate.
Bay Area Permit and Inspection Costs
Furnace replacement requires a mechanical permit in every Bay Area jurisdiction. Permit fees vary:
Palo Alto: $185-$285 (mechanical only) + $75 plan check if BTU change
Mountain View: $175-$265
Sunnyvale: $195-$305
San Jose: $200-$320
Cupertino: $185-$275
Menlo Park: $190-$295
Redwood City: $180-$280
San Mateo County (unincorporated): $210-$340
Permit fees are included in our installation quotes — there are no separate "permit fees" added later. Inspection happens at the final close-out, typically 4-8 weeks after install.
Pricing Reference Table
| Service / Item | Cost Range | Notes |
|---|---|---|
| 80% AFUE single-stage (80k BTU) | $4,200-$6,200 | Entry tier, B-vent, no condensate drain |
| 95% AFUE two-stage (80k BTU) | $5,800-$8,500 | Most common modern install, $600 federal credit |
| 95-98% AFUE modulating (80k BTU) | $7,500-$9,500 | Premium comfort, $600 federal credit |
| 100k BTU larger furnace | +$400-$900 vs 80k | For 2,500+ sq ft homes |
| 120k BTU largest residential | +$800-$1,500 vs 80k | For 3,000+ sq ft homes |
| PVC venting (for condensing) | $400-$900 | Required for 95%+ AFUE; included in quote |
| Gas line resizing | $300-$800 | If BTU input changes |
| Condensate pump | $250-$450 | If gravity drain not feasible |
| Heat pump conversion (3-ton) | $11,000-$22,000 | $2,000 federal + $1,000-$3,000 TECH Clean |
| Permit fees | $175-$340 | Varies by jurisdiction; included in quote |
Frequently Asked Questions
How much does a new furnace cost installed in Palo Alto?
$4,200-$6,200 for 80% AFUE entry tier, $5,800-$8,500 for 95% AFUE two-stage (most common modern install), $7,500-$9,500 for 95-98% modulating premium tier. Heat pump conversion runs $11,000-$22,000 before incentives, often netting lower than gas after rebates.
Should I replace my old 80% AFUE furnace with another 80% or upgrade to 95%?
In most cases, 95% AFUE is worth the upgrade. The price gap has narrowed (typically $1,000-$1,500), the 95% qualifies for the $600 federal IRA 25C credit (which 80% does not), and gas savings of 15-18% pay back the differential in 4-7 years in Bay Area heating loads. Consider 80% only if your venting situation makes condensing furnace installation prohibitively expensive.
When should I consider heat pump conversion instead of furnace replacement?
Strong cases for conversion: (1) your AC is also end-of-life and you'd be replacing both anyway; (2) you have adequate electrical panel capacity (200-amp service usually sufficient); (3) you're comfortable with the upfront premium for the long-term operating cost savings; (4) you want to qualify for the $2,000 federal credit + state/utility rebates. The combined incentives often bring net cost below a gas combo replacement.
How long does furnace installation take?
Standard 80% replacement: 4-6 hours. 95% condensing replacement (with new venting and condensate work): 6-10 hours. Most installations complete in a single day with same-day inspection scheduling.
Do I need to replace the AC when I replace the furnace?
Not necessarily, but it's often worth bundling. Reasons to replace together: (1) the AC and furnace share the same air handler / ductwork in many configurations; (2) bundled install is typically 15-25% cheaper than two separate jobs; (3) federal IRA 25C credits stack ($600 each); (4) HERS verification can cover both at once. Reasons to keep separate: AC is recent (under 8 years), furnace failure was unexpected and unbudgeted, or you're testing a heat pump conversion path.