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.

1. Only burn dry, cured wood—logs that have been split, stacked, and dried for eight to 12 months. Cover your log pile on top, but leave the sides open for air flow.

Hardwoods such as hickory, white oak, beech, sugar maple, and white ash burn longest, though dry firewood is more important than the species. Less dense woods like spruce or white pine burn well if sufficiently dry, but you’ll need to add more wood to your fire more often, according to the Chimney Safety Institute of America (CSIA).

2. Burn firewood and only firewood! Crates, lumber, construction scraps, painted wood, or other treated wood releases chemicals into your home, compromising air quality. Log starters are fine for getting your wood fireplace going, but they burn very hot; generally only use one at a time.

3. Close the damper when not using your wood fireplace to prevent warm indoor air—and the dollars you’re spending to heat it—from rushing up the chimney.

4. Keep bifold glass doors open when burning a fire to allow heat to get into the room. On a factory-built, prefab wood fireplace with a circulating fan, keep doors closed to prevent unnecesary heat loss.

5. Have a chimney cap installed to prevent objects, rain, and snow from falling into your chimney, and to reduce downdrafts. Caps have side vents so smoke escapes. A chimney sweep usually provides and can install a stainless steel cap, which is better than a galvanized metal one because it won’t rust. Caps cost $50 to $200.

6. Replace a poorly sealing damper to prevent heat loss. A top-mounted damper that also functions as a rain cap provides a tighter closure than a traditional damper for your wood fireplace.

7. Install carbon monoxide detectors and smoke detectors in your house—near your wood fireplace as well as in bedroom areas.

8. Get your chimney cleaned twice a year if you burn more than three cords of wood annually. A cord is 4 feet high by 4 feet wide by 8 feet long, or the amount that would fill two full-size pickup trucks.

9. To burn a fire safely, build it slowly, adding more wood as it heats. Keep the damper of your wood fireplace completely open to increase draw in the early stages. Burn the fire hot, at least occasionally—with the damper all the way open to help prevent smoke from lingering in the fireplace and creosote from developing.