How the Inflation Reduction Act Will Help Households?
On 16th August 2022, President Joe Biden signed the law on Inflation Reduction Act of 2022. The act focuses on fighting inflation, lowering costs of medical prescriptions for senior citizens and, most importantly, pushing the domestic clean energy industries so that the U.S. can reduce its carbon emissions by 40% by 2030.
However, even after listening to the news and reading articles, all Americans have the same question: What does the Inflation Reduction Act do for me?
Here are seven benefits of the Inflation Reduction Act of 2022 for an American household.
4 Key Benefits of the Inflation Reduction Act
1. Tax incentives for electric vehicle owners:
According to a study by the U.S. Department of Energy, electric vehicle owners can save up to $14,500 in 15 years if they switched to driving an electric vehicle instead of a gas-powered vehicle. Furthermore, electric vehicle sales increased by 85% between 2020 and 2021.
These numbers go a long way in showing the benefits of switching to an electric vehicle. However, if these are not reasons enough, the Inflation Reduction act provides tax credits. Under the act, electric vehicle owners can receive $7,500 in tax credits for the purchase of a new electric vehicle. Additionally, families can receive $4,000 in tax credits for the purchase of a used electric vehicle. These can help families save $950 per year.
2. Solar and Storage Tax incentives and rebates:
The Inflation Reduction Act further provides tax credits to American households. Households can receive a 30% tax credit on solar systems and clean energy storage technologies. This includes all batteries that can save solar energy. Called the solar Investment Tax Credit scheme, it can help households get back one-third of the total solar system expenses between 2022 and 2032.
The Act also offers an $8000 rebate for heat pumps, a $1750 rebate for heat pump water heaters, and an $840 rebate for electric cooking appliances such as electric stoves, ovens, ranges and so forth. However, these rebates have eligibility conditions and only those that qualify can avail of these rebates.
3. Boosts local clean energy suppliers:
The act boosts and incentivizes domestic production of clean energy technology such as solar energy systems. The act promotes local sourcing with benefits such as tax credits. Clean energy technology companies that source resources from local American suppliers can receive energy tax credits if they use beyond a certain threshold of local resources for production. E.g. a 10% additional tax credit for US made solar panels. Workers, employees, and apprentices of such companies can also gain bonus credits.
4. Reducing overall pollution:
The Act aims to reduce greenhouse gas emissions. By incentivizing various aspects of clean energy technology (as discussed above – local manufacturing and sourcing, hiring and paying prevailing wages to apprentices and by providing tax credits/rebates to electric options), the greenhouse gas emissions are expected to decrease by about 1 gigaton by 2030. Furthermore, the Act will help deploy clean energy solutions to reduce particle pollution and reduce 2300 premature deaths and 100,000 asthma attacks per year.
The Director of Federal Policy, Zach Friedman, has called the Inflation Reduction Act of 2022 “All carrots, no sticks”. Although the bill will face challenges in the future, it is clear that there are many advantages – both monetary and otherwise – for an American household.