An Inflation Reduction Act Overview: 3 Ways To Save Money and Energy
In August 2022, the Inflation Reduction Act became law. Its deficit reduction and investment tax credit provisions include several renewable energy provisions designed to save you and your household money. By upgrading your appliances and making a few changes around your home, you may manage your energy costs now and in the future.
Here are three ways you may save money on energy expenses with the help of the Inflation Reduction Act of 2022.
1. Heat Pump Tax Credits
Air conditioners use a significant amount of electricity, especially in America's south and southwest. Heat pumps, on the other hand, use only about one-fifth of the electricity as an air conditioner and provide heating and cooling.
Under the Inflation Reduction Act, households that purchase an electric heat pump may receive a tax credit of up to $2,000. Low-income households may also get a rebate of up to $8,000 to cover installation costs. These rebates and credits apply only to equipment installed on or after Jan. 1, 2023.
2. Electric Vehicle Rebates
Beginning in 2023, the Inflation Reduction Act provides qualifying electric vehicle (EV) buyers with up to $4,000 for purchasing a used EV and up to $7,500 for buying a new EV.2 Beginning in 2024, dealerships issue these credits at the time of sale, reducing the purchase price of some of today's top EVs by up to 25%. It is important to note that the only EVs that qualify for this rebate are those that receive their final assembly in North America.
3. Energy Efficient Home Improvements
The Inflation Reduction Act also contains rebates, credits, and other financial benefits to encourage home improvements designed to increase energy efficiency.
- Those who invest in a heat pump type of water heater may receive a rebate of up to $1,750. 3
- Those who invest in an upgraded electric panel may receive a rebate of up to $4,000. 3
- Someone who replaces a gas stove with an electric model may receive a rebate of up to $840. 4
- Someone who replaces a traditional clothes dryer with an electric heat pump type of dryer may also receive a rebate of up to $840. 3
- Those who improve their home's insulation may receive a rebate of 50% of the cost or up to $1,600. 3
Finally, households that invest in clean energy, such as solar, may receive a tax credit of up to 30% of these efficient-energy systems' purchase and installation costs. Upgrading to solar or geothermal energy may save you money on the front end and may allow you to manage your energy bills better for decades to come.
Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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1 Heat Pump Vs. Air Conditioner: What Are The Differences?, Forbes, https://www.forbes.com/home-improvement/hvac/heat-pump-vs-air-conditioner/
2 Which EVs Qualify for the New Electric Vehicle Tax Credit? It's Complicated, Consumer Reports, https://www.consumerreports.org/cars/hybrids-evs/electric-vehicles-that-qualify-for-new-ev-tax-credit-a9310530660/
3 How much money will you get with the Inflation Reduction Act?, Rewiring America, https://www.rewiringamerica.org/app/ira-calculator
4 How to Get a Free Stove From the Government (and Help Save the Planet), Lifehacker, https://lifehacker.com/how-to-get-a-free-stove-from-the-government-and-help-s-1849431130