If your budget is really tight, a free-standing gel-fuel or electric fireplace eliminates installation costs. But be aware that some bare-bones alternatives don’t completely succeed in mimicking a real wood fire.

Check local building codes for possible restrictions on the types of fireplaces that can be installed in your area.

Costs of a wood-burning fireplace

An open-hearth, wood-burning fireplace—like the ones you see in mountain resort hotels—requires the help of a skilled, professional mason and a budget approaching (and often exceeding) $10,000.

For an existing home, considerable renovation work is required, including a foundation to carry the weight of the firebox and chimney, and the cost of the chimney itself.

Expect to pay $7,000 to $10,000 or more.

  • Cost saver tip: Go for a drywall surround and a simple, wall-mounted mantle.

Costs of a gas-burning fireplace

A fireplace unit that burns natural gas or propane runs about $2,000 for the basic materials package. Installation and finishing typically add $2,500.

  • Cost saver tip: Switch to a simpler surround and mantle, and get a direct-vent fireplace so you don’t need a chimney. Or, opt for a vent-free gas fireplace for $400 or so. Hiring a professional to install a gas line or a connection to a propane tank adds about $1,000.

Your least-expensive option

A gel-fuel fireplace or an electric fireplace starts under $400. With a portable unit, that’s the total cost since the fireplace is ready to use once you remove the packaging.

Because there’s no flue or chimney, it’s easy to install TVs or other electronic gear directly above an electric fireplace. If you include a mantel package, expect to pay $800 to $1,600. One perk available: sound effects that mimic the crackle and pop of a real fire.

Ongoing costs

Estimate your energy costs by using a fuel cost comparison calculator. Gel fuel, not included in the calculator, costs $3 per 13-ounce can, enough for three hours.

For a wood-burning fireplace, figure on $100 to $200 a year for chimney cleaning. Gas fireplaces need an annual service check ($100 to $150) plus a chimney inspection. Gel-fuel and electric fireplaces don’t need regular maintenance.

Tax credits for fireplace inserts

Through Dec. 31, 2011, you may qualify for a federal tax credit for up to $300 in costs, if you install a biomass (wood- or pellet-burning) fireplace insert that’s at least 75% fuel-efficient.