How the Inflation Reduction Act Helps Curb the Costs of Inflation
In August, President Joe Biden signed the Inflation Reduction Act, which aims to build a better economy for working families. Many Americans hope the act will lower health care and prescription drug costs.
The bill’s aggressive action in battling the climate crisis is part of the Inflation Reduction Act, which is not getting much attention just yet. While the IRA is still pretty fresh, it has the potential to benefit homeowners, businesses, and real estate investors.
Read on to learn more about the benefits of electrification and going green based on what we know so far.
What Is the Inflation Reduction Act?
The IRA is one of the most significant accomplishments of the current administration. Many see this act as a slimmed-down version of the Build Back Better bill that never made it out of congress.
Not everyone is convinced that the legislation will significantly impact inflation in the short term. However, some parts of the IRA could still benefit millions immediately, and it could have long-lasting positive effects.
Instead of going through the entirety of the Inflation Reduction Act, here are the most prominent provisions:
Create a 15% corporate minimum tax rate for companies with at least $1 billion in income
Prescription drug price reform that allows Medicare to negotiate certain drug prices
IRS tax investment to help the organization deliver on its duties
Affordable Car Act (ACA) subsidy extension to help nearly three million Americans maintain their health insurance plans
Energy security and climate change investments to encourage electrification and reduce carbon emissions
Many homeowners and real estate investors are excited about the focus on tackling the climate crisis. The Inflation Reduction ACT creates various tax rebates and incentives for those who go green via electrifying their properties.
Things like rooftop solar panels, electric vehicles, and energy-efficient appliances will be more affordable by extending or creating tax breaks. Depending on the scope of someone’s electrification efforts, consumers could improve quality for up to $14,000 or more in tax breaks, rebates, and more.
The benefits of electrification go beyond tax relief, but the IRA makes it more possible for property owners to save green by going green.
5 Financial Benefits of the Inflation Reduction Act
The Inflation Reduction Act plans to invest $369 billion in energy security and climate change efforts. While a significant portion of this investment will go towards helping diversify and bolster renewable energy production and technology, it also includes numerous tax incentives for home and business owners.
These tax incentives are expected to help save more than 100 million homes over $37 billion a year on their electric bills alone, not to mention a reduction in taxes come April.
Save on a New Car
Starting in 2023, shoppers who purchase a brand-new electric vehicle can be eligible for up to a $7,500 tax rebate. Consumers can also earn a similar refund for up to $4,000 for a used EV.
The credit will actually be issued from the auto dealer during the time of the sale. With many EVs already coming down in price and the affordability of adding a Level 2 EV charging station at home, many families can benefit from switching from gas to electricity in their driveways.
There are some strict requirements about which vehicles qualify for the rebate, so make sure you do your homework before heading out to the car lot.
Save on Cooling Costs
Everyone knows that air conditioners devour electricity and exponentially raise utility bills when in use. The Inflation Reduction Act now allows homeowners to reduce power bills while keeping their homes comfortable.
Households can earn up to $2,000 to purchase an electric heat pump. Heat pumps are known to use five times less energy than a typical AC unit, and low-income families can earn an $8,000 rebate on installing a heat pump.
Adding insulation is one of the most straightforward ways to make your house more efficient, as insulation allows you to prevent energy from being wasted while lowering your electric bill. The IRA provides a tax rebate of up to $1,600 to improve your home’s insulation and seal energy leaks.
Save With Solar
A part of the Inflation Reduction Act called the Residential Clean Energy Credit provides a credit of up to 30% to homes that invest in renewable energy like solar. Unlike provisions that do not occur until 2023, the Residential Clean Energy Credit is retroactive to the beginning of 2022.
The average cost of installing a residential solar-powered system is currently $19,000, so this new incentive can save $5,700. On top of a rebate for installation, solar-powered homes, on average, save over $300 per year on electricity. Those savings multiply when homeowners set up a microgrid consisting of solar-power battery backups and a smart electrical panel.
Save With Electric Appliances
If you are in the market for a new stove, it might be time to exchange that old gas range for a new electric model. The IRA provides a rebate of up to $840 for an electric stove, cooktop, range, or oven. Your new oven will feel like a gift, depending on your chosen model.
Not only does going with an electric range mean a generous rebate, but you will be doing your part to reduce greenhouse gases. A study by Standard University found that gas stoves leak methane even when not used. Stoves across the United States emit similar pollution as half a million gas-powered vehicles.
Save in the Utility Room
Your home’s energy efficiency base lives in your utility room or garage. The Inflation Reduction Act offers several rebates to help homeowners reduce the upfront costs of going green.
For example, homeowners can get a tax rebate for up to $1,750 for investing in an energy-efficient heat pump water heater (often called a hybrid water heater). This appliance pulls heat from the air to keep your water warm, which reduces how much electricity is needed.
Homeowners may also earn up to a $4,000 rebate for upgrading their electrical panels. This arrangement is a win-win for those with older homes. Many older homes have outdated 100-amp circuit breakers that cannot handle the demands of modern electrification efforts. Homeowners can also upgrade to a smart electrical panel that offers more monitoring and control options than typical electrical panels. Greater control of when and how your electricity is used can result in hundreds of dollars in savings each year.
How To Prepare for Inflation Reduction Act Programs
The programs under the Inflation Reduction Act are not active yet, including those that are retroactive. Most programs will not be fully available until the beginning of 2023. More detailed rules about qualifying for these programs and how they will work are coming soon.
Homeowners do not have to wait to start preparing for the Inflation Reduction Act to take effect. First, now is a great time to schedule an energy audit for your home. This audit can tell you how much gas and electricity your home currently consumes and offer suggestions on how to make your home more efficient.
When the problems revealed by this assessment are implemented, you could save 5% to 30% on your electric bill. An average energy audit costs $413 but is worth every penny.
The second step is to start talking to contractors and getting quotes for the various projects you want to complete. Once the Inflation Reduction Act is entirely in effect, home and business owners across the country will be looking to take advantage of the various programs.
Many appliances and electrical equipment are still on back order with COVID-19-induced supply-line delays so that you can get ahead of the game by planning. By starting the planning process now, you can get started on your electrification upgrades as soon as possible.
Let Watson’s Charging Stations & Electric Help You Take the Leap to Going Green
There is no question that the electrification movement is gaining momentum. Homeowners across the country are adding solar panels, buying electric vehicles, and switching to more renewable energy sources. Sadly, the cost has kept some consumers from making the leap to going green.
Thanks to the energy security and climate change initiatives in the Inflation Reduction Act, more people are going to be able to take part in environmentally-friendly and cost-savings programs.
Watson’s Charging Stations & Electric has been the premier leader in electrification in Gilroy, CA, and the Santa Clara Valley for years. We are here to serve you, from installing a new EV home charger to dealing with electrical issues around your home. There is no job that we cannot handle efficiently and affordably.
If you are interested in learning more about how going green can help you take advantage of the new Inflation Reduction Act programs or want to discuss ways to reduce your monthly electric bills, give us a call for a free consultation with one of our electricians today.