In cold, dry regions, snowpacks can build a basal depth hoar layer that has a lower density that effectively increases the insulative ability and thus warms permafrost. However, the precise magnitude of the depth hoar insulation and the subsequent impact on permafrost thermal regimes remains highly uncertain. Current Earth and land surface models do not consider the depth hoar effect in their simulations. This study coupled a depth hoar scheme into the snowpack processes within a land surface model. The depth hoar effect on the permafrost thermal regimes in present (1980–2016) and future (2015–2100) climates was assessed by model simulations excluding and including depth hoar. Snow and soil thermal properties observed at the field sites were used to evaluate the model results. The modeling assessment revealed that the depth hoar produced permafrost warming of 2.5–4.0 °C in February under the present climate and deepened the active layer thickness by up to 20 cm. The insulative ability of depth hoar was further significant for colder air temperatures and a thicker snowpack. The effect was demonstrated by increased temperature differences between the air and soil depth at 20 cm with increasing snow depth under colder air temperature conditions. Under a future warming climate, the depth hoar functioned as an insulator enhancing permafrost degradation. Our analysis reveals a new perspective on the underlying influence of depth hoar as a driver of permafrost degradation in present and future climates. We recommend improvements to model representation to include the depth hoar process to improve simulations of the permafrost-related changes under warming climate.