Inflation Reduction Act: Calculate the Money You Should Be Getting in 2023
With 2023 coming closer into view, there’s new economic legislation that will come into play — some of which will hopefully benefit Americans, including the terms of the Inflation Reduction Act (IRA).
Passed in August, the $739 billion act aims to both curb inflation and provide environmental benefits alongside “lower costs for families, combat[ing] the climate crisis, reduc[ing] the deficit and finally ask[ing] the largest corporations to pay their fair share,” according to a statement issued by the White House.
Among the provisions are lowered health care costs and prescription drug costs for millions of Americans, particularly those on Medicare (in 2025, a $2,000 out-of-pocket maximum will also be implemented). There are also substantial direct rebates and tax deductions for investing in home improvements like energy-efficient appliances and solar power systems. Tax credits related to the purchase of electric vehicles will also be clarified and expanded.
If you’re curious to know exactly how you might financially benefit, the Rewiring America calculator (courtesy of the nonprofit agency, one that aims to “make electrification simple, measurable and inevitable”) is available online.
To use the calculator, you simply need to add your ZIP code, homeowner status (renters are eligible, too), annual income, tax filing status and the total size of your household. Not only will the calculator come back with customized incentives you might take advantage of, but it will also differentiate between tax credits and automatic discounts or rebates.
For example, if you’re a head of household tax filer living in Chicago, earning $125,000 a year — and the owner of a house accommodating four people — your total incentives would be $31,700 ($14,000 in direct rebates and $17,700 in tax credits). The Rewired America tool also estimates $1,250 a year in heating/cooling and electricity bill savings by upgrading to energy efficient systems in that same scenario.
As well, homeowners can get a 30% tax credit for installing geothermal heating insulation and an additional 30% tax credit for installing a solar rooftop. These two tax credits are available now, as noted by Rewired America, while most other discounts and tax credits (electrical wiring, induction ranges, weatherization, heat pumps, EV purchases) will go into effect in 2023. However, the site does offer a disclaimer regarding the rebate/tax credit calculations: “This is an estimate. We do not yet know how or when upfront discounts will be implemented in each state, so we cannot guarantee final amounts or timeline.”
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For more details on upgrading your home energy systems — and taking advantage of the incentives provided by the IRA — Rewiring America also has a helpful guide, “Go Electric Now” that is available here. The IRS also offers some helpful tips and reports on the latest IRA developments here. For further information, it may be helpful to connect with a tax professional so you can be sure you’re getting the full array of benefits the IRA will provide.
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