3 Ways the New Inflation Reduction Act Could Save You a Lot of Money

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On Friday, August 16, President Joe Biden signed into law the Inflation Reduction Act of 2022, which could save you a lot of money. The $773 billion package permits Medicare to negotiate drug prices, reduces taxes in several ways, and includes additional investments totaling $433 billion tied to climate change.

Among the brand-new investments totaling $433 billion are:

Tax credits, loans, and grants to boost U.S. production of wind turbines, solar panels, batteries, and other energy production and storage methods; and tax refunds and credits for consumers to reduce energy expenses. Ones in the clean energy sector are to be created, and the bill also helps underprivileged areas train for better jobs.

To stimulate the purchase of new and used electric vehicles, tax incentives should be offered to households with lower and intermediate incomes.

Allow Medicare to attempt to bargain down the cost of pharmaceuticals. Medicare recipients would have to pay an additional $2,000 per year for prescription medications, down from the current $7,050 (with an unlimited 5% coinsurance on prescriptions when that maximum is met) under the terms of the new legislation.

The Affordable Care Act’s premium tax credits should be made permanent through 2025. Low-income individuals and families can utilize this credit to offset the cost of health insurance premiums acquired through the marketplace. Households with annual incomes at or below 400% of the federal poverty line are now eligible under the revised guidelines.

Revenue will be increased thanks to the Inflation Reduction Act by:

Establishing a mandatory minimum tax rate of 15% for businesses with annual revenues over $1 billion.

Budgeting $80 billion over the next decade will help the Internal Revenue Service hire and train more auditors, update its paper-based filing system, and expand its online resources for taxpayers.

1. Save Money on Energy

If your family’s annual income is less than 80% of California’s median household income ($78,672 in 2017), you may qualify for a 100% rebate. Spending $10,000 on a heat pump may get you $9,750 back. Between 80% and 150% of the median income receives a 50% rebate. Over 150% of the median household income is ineligible.

The Inflation Reduction Act offers homeowners incentives to enhance energy efficiency. The biggest savings and incentives are for a heat pump, which can replace a furnace and air conditioner.

The state manages the discounting. After federal funding, each state will begin a program. The Database of State Incentives for Renewables and Efficiency tracks all 50 states’ energy efficiency tax credits and deductions.

You may also be entitled to a tax credit. Anyone can apply, regardless of income.

30% of the purchase price plus labor charges of a heat pump under $2,000 is tax deductible. This promotion is good through December 31, 2032, for all 2018 pumps ordered.

Air-sealing materials or systems ($600), needed electrical supply upgrades ($600), and a home energy audit ($150) are eligible for tax deductions of up to $1,350.

The Inflation Reduction Act may save you money on a range, cooktop, or wall oven.

It lays out the principles for rebates; State authorities will choose the specifics based on income and geography.

You may be eligible for reimbursement of up to $840 when converting from natural gas or propane to electricity and up to $500 when making the move. If you upgrade your electrical panel to accommodate these gadgets, the government can compensate you up to $4,000. Heat pumps have income limits.

The measure gives a 30% tax credit for installing energy-efficient external windows, skylights, and doors.

The highest annual tax credit is $2,000 for large-scale projects. New doors cost $500, windows and skylights $600. Installations must follow Energy Star’s efficiency criteria.

Installing solar panels or other renewable energy equipment might earn homeowners a 30% tax credit.

According to the Center for Sustainable Energy, that may save $4,500 to $7,500 on a residential solar power system ($15,000 to $25,000).

It also covers battery storage technology, allowing solar-powered houses to store energy for later use.

2. Get Tax Credits for Switching to an Electric Vehicle

This act increases the tax credit for certain new electric vehicles from $2,500 to $7,500 and creates a tax credit of up to $4,000 for used electric vehicles.

Earnings limits apply to both tax credits. The new electric vehicle tax credit is limited to those with a modified adjusted gross income of $150,000 or less. (A joint income of $300,000 is acceptable for a married couple filing jointly.) The income thresholds for qualifying for the used electric vehicle credit are lower: $75,000 for single filers and $150,000 for joint filers.

All electric vehicles must be priced under a certain threshold to qualify for the tax credits, and there are income limits as well. Brand-new battery-powered minivans, pickups, and SUVs can’t cost more than $80,000. New electric vehicles are limited to a maximum price of $55,000.

On the other hand, the used electric vehicle credit requires a vehicle to be at least 2 years old and have a price tag of less than $25,000.

The rebates are available for electric vehicles purchased in 2023. The credits can be used as a rebate at the dealership starting in 2024.

3. Lower your healthcare costs

The Affordable Care Act, also known as Obamacare, allows the federal government to negotiate lower prices for the most expensive prescription drugs, set an annual limit of $2,000 for Medicare beneficiaries, cap the cost of insulin at $35 per month for seniors, and increase subsidies for individuals purchasing their health coverage. Vaccinations for the elderly are provided free of charge under the legislation. Anyone in need of expensive medications will be affected by the new rules, making them “significant.”

Most of the law’s benefits will accrue to Medicare recipients, but health experts predict that some of the law’s provisions will eventually make their way into the private insurance market.

The Affordable Care Act, also known as Obamacare, allows the federal government to negotiate lower prices for the most expensive prescription drugs, set an annual limit of $2,000 for Medicare beneficiaries, cap the cost of insulin at $35 per month for seniors, and increase subsidies for individuals purchasing their health coverage. Vaccinations for the elderly are provided free of charge under the legislation. Anyone in need of expensive medications will be affected by the new rules, making them “significant.”

Most of the law’s benefits will accrue to Medicare recipients, but health experts predict that some of the law’s provisions will eventually make their way into the private insurance market.

All in all, this new law looks like it will improve the lives of millions of everyday Americans. Things will become clearer as the new law is implemented. Not So Common Cents will stay abreast of the rollout as it happens and report back with up-to-date information on how you can take advantage of this new law.

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