The Inflation Reduction Act is officially in effect. Here’s how to take advantage of it.
With millions of dollars in financial incentives, Biden's landmark bill is actually a pretty sweet deal.
As inflation rose to record levels last year, hiking up the already astronomical cost of living in the United States, the federal government actually managed to make some big moves and passed the landmark Inflation Reduction Act (IRA) bill in August 2022. The legislation, which officially took effect on Jan. 1, 2023, aims to curb inflation by lowering prescription drug costs, bolstering tax credits for small businesses, cracking down on large corporations, and more. It also made millions of people eligible to save big money when they invest in green energy, incentivizing consumers to help reach the goal of cutting carbon emissions from homes and buildings in half by 2032.
For more than 150 years, fossil fuels have been providing around 80% of the world’s energy — and contributing to the climate emergency we’re now in. The IRA, according to the White House, is designed in part to combat this crisis head-on by making green energy more accessible for the everyday person. “We are going to take the most aggressive action ever, ever, ever to confront the climate crisis and increase our energy security,” President Joe Biden said during a September 2022 news conference. “We’re going to build a future — the future — here in [the] United States of America with American workers, with American companies, with American-made products.”
What are the Inflation Reduction Act incentives?
Under the IRA, you can take advantage of two different types of incentives: redeemable tax credits that can be claimed during tax filing season and partial refunds (also known as rebates) that reduce the upfront cost of green energy appliances and installations. By taking advantage of the IRA’s incentives, you may be able to save tens of thousands of dollars in green energy upgrades for your home.
If you’re part of a low-income household earning less than 80% of your area’s median income, the legislation has some additional funding set aside for you — which means those rebates could eventually cover the majority of the money you spend on green energy investments, per the White House. If you’re part of a middle-income household earning up to 150% of your area’s median income, you can also take advantage of IRA incentives, though you won’t qualify for as much. Some states have input into how these federal incentives and tax credits are distributed, which may affect how much money you can save on these green energy upgrades. To get a better idea of your savings possibilities, you can use this calculator from Rewiring America. The White House also has a guide on the IRA here.
What purchases qualify under the Inflation Reduction Act?
According to the White House, several in-home appliances qualify for tax breaks under the IRA, including: rooftop solar, insulation and air sealing, clothing dryers, heat pumps, breaker boxes, heat pump water heaters, electric stoves or ovens, and more. Not only will these energy-efficient upgrades save you money on your utility bill every month, per the Center for American Progress, but they’ll also help you contribute to a cleaner environment.
Income-qualified households can receive a tax credit of up to $7,500 for new electric vehicles assembled in North America with a suggested retail price of $80,000 or less for SUVs, pickup trucks, and vans, or $55,000 or less for other vehicles. You can get up to $4,000 for used EVs, as long as they’re at least two years old and cost $25,000 or less. Beyond those baseline qualifications, there are some more nitty-gritty details to pay attention to; before you go car shopping, check the IRS’ detailed rundown.
How can you actually get the credits?
While many of the rebates available under the IRA will be immediately applied as upfront discounts on certain purchases (like heat pumps, insulation, and solar panels), rebates on items like electric vehicles may not apply until you file your taxes the following year. So, if you buy a qualifying electric car in 2023, you likely won’t get the return until you claim it on your tax returns at the start of 2024 — so make sure to keep your receipts.
That said, it can be confusing to determine what you will or won’t qualify for. In many cases, the company selling you a product will be able to help you figure it out; if they don’t offer the information up front, ask them about any possible discounts or rebates before you finalize the purchase. You can also consult a tax professional, who should be able to help you make sense of what you’ll be able to get on your next round of returns.
How can you benefit as a renter?
For the home-specific credits and discounts, the IRA definitely benefits homeowners more than renters — but that doesn’t mean renters can’t get anything. If an appliance in your rental breaks, for example, you can discuss the IRA with your landlord and request they replace the broken appliance with something more environmentally friendly. In certain cases, it may be worth bringing up safety concerns; gas-powered stoves, for example, have been linked to air quality and health issues.
Sure, you may not get to take advantage of that rebate yourself, but you’ll benefit from lower utility costs and a safer, greener home. If your landlord isn’t willing to front the cost of a new green appliance, even with rebates, you may also be able to pay for the appliance yourself, get those discounts under the IRA, and get your landlord’s approval in writing that you’ll take the appliance with you when you move out.
In any case, there are plenty of ways you can take advantage of the incentives offered under the Inflation Reduction Act and work toward minimizing your own home’s carbon footprint.