The Inflation Reduction Act signed into law by President Biden in August, including about $370 billion to fight climate change, some of it in the form of tax credits and rebates to help consumers save thousands of dollars on energy-saving appliances, plug-in vehicles and renewable electricity for them. houses.
But taking advantage of those savings will require patience and initiative.
The Biden administration created a website designed to help you find out which cars, home appliances and home improvements are eligible for credits and tax breaks. The answers are still unclear in many cases because the programs are too new or the legal requirements are too strict. White House officials said the website will be regularly updated as details become available, and they advise consumers to sign up to receive email updates.
Here’s what we know so far about how to use the new law to save money. All benefits have one thing in common: Each run through at least 2032.
Improve home energy efficiency
The new law extends through 2032 an existing program that allows homeowners to claim a credit on their federal tax return of 30 percent for household energy efficiency improvements, such as windows and doors. insulation. Buyers can claim up to $600 per purchase for up to $1,200 a year. To qualify for tax credits, items must have The most energy efficient star certification. Homeowners can also claim a $150 tax credit for home energy testing.
Install renewable energy at home
Homeowners can continue to claim the 30% federal tax credit for investments in renewable energy, such as rooftop solar panels or geothermal heat pumps. They can also claim a new credit for batteries intended to store electricity from renewable sources. There is no limit to the amount that can be claimed. In 2033, the credit drops to 26% of the total purchase price, and in 2034 it drops to 22% before being phased out the following year.
Discounts on energy-saving appliances
The law provides for new rebates for the purchase and installation of energy-efficient appliances, including air conditioners, dryers and induction cookers.
The rebates will be run by states, and the amount you can get will depend on how your income compares to the average in your state.
If you earn up to 80 percent of your state median income, you can get 100 percent back on the cost of your energy-efficient appliances or home improvements through a rebate program. If you earn 80 to 150 percent of your state median income, you can get 50 percent of expenses back, up to $8,000.
To receive the discount, you’ll likely have to prove the device’s income and expenses to your state. How soon this program goes into effect and how smoothly it works will most likely vary from state to state. White House officials say they hope that the federal website will direct consumers to state discounts as they become available.
Heat pump
The authors of the new law hope it will spur Americans to use electricity heat pump – one of the most energy efficient ways to heat and cool your home. Consumers can use the new federal tax credit to receive up to $2,000 toward the purchase and installation of heat pumps, while those who meet income eligibility for the state rebate program Their can get up to $8,000.
The law also includes a rebate of up to $4,000 for upgrading your home’s electrical system to install heat pumps or other energy-efficient electrical equipment.
As with other discounts on home appliances, the heat pump rebate will be offered across the states.
New electric car
The law expands an existing program that allows new electric vehicle buyers to take a tax deduction of up to $7,500 if the vehicle is assembled in North America, but it adds new requirements for income and assembly location.
Under the current program, which expires at the end of 2022, automakers that have sold more than 200,000 electric vehicles this year will not be eligible for the electric vehicle credit – so car buyers due General Motors, Toyota and Tesla manufacturing will not be eligible for the credit. But motorists can still get a tax credit on some electric vehicles made by Ford, Honda and Subaru. The IRS has full list which cars are eligible for the credit and how much.
Starting in 2023, cars made by GM, Toyota, and Tesla will once again be eligible for the credits. But some new income requirements will begin. The credits will only be available to individuals earning less than $150,000, single householders earning less than $225,000, and couples earning less than $300,000 together. They can only be used on sedans priced under $55,000 or vans, vans and SUVs priced under $80,000.
Also starting in 2023, the credits will depend on the number of vehicles assembled in the United States. You can get a credit of $3,750 for an electric vehicle that is assembled and has battery components made in North America. You can get an extra $3,750 if the minerals used in the battery are mined in countries where the US has Free Trade Agreements.
After 2024, the credit will only apply to batteries with no components manufactured in China, Russia, North Korea or Japan. After 2025, the credit will not apply if even a mineral used in the battery is mined or processed in one of those four countries.
The provision was introduced to force automakers to shift their electric vehicle supply chains from other countries, particularly China, to the United States.
Used electric car
For the first time, used electric vehicle buyers will also be eligible for a tax deduction, equal to 30% of the total cost of the vehicle and capped at $4,000. The credit will only apply to cars priced under $25,000, and total credits are capped at $75,000 for individuals, $112,500 for single householders, and $150,000 for couples husband is married.
Used vehicles must be purchased through a dealer, but there are no US-made or content requirements.
In 2022 and 2023, you can claim the new electric vehicle tax credit on your federal tax income form, but starting in 2024, you can transfer the credit directly to the dealer to receive them in cash at the time of purchase.
