Inflation Reduction Act Pushes Financial Incentives, Reduced Costs

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Inflation Reduction Act Pushes Financial Incentives, Reduced Costs
The Inflation Reduction Act offers tax credits and other incentives for switching to cleaner energy alternatives.

It has been called groundbreaking and historic by some, expensive and futile by others. But the parts of the Inflation Reduction Act that deal with climate change could dramatically impact the lives of many Americans — and soon. 

"The Inflation Reduction Act will add another $370 billion in clean energy tax credits in reconciliation, including incentives to accelerate domestic production of solar panels, wind turbines, batteries and critical materials process," President Joe Biden said.

Tackling climate change has been debated for so long that many Americans might be inclined to chalk these words and actions up to more political chatter with little results.  

"It's because American people want their government to do something so they can go into August recess and they can get ready for elections and really brag about so many things," Haddad Media CEO Tammy Haddad said. "If you read every single poll — and you don't have to read a poll, you can talk to your neighbor — things are bad. The weather is bad. You can't get what you want. Should I wear a mask? Shouldn't I wear a mask? All of these things. And then finally, from the government comes certainty."

Here is how you may feel the impact of the legislation. 

If you already own an electric vehicle, you are probably already seeing huge savings. Currently, EV drivers receive a $7,500 tax credit for a new vehicle and a $4,000 tax credit for used vehicles. This legislation extends that tax credit until the end of 2032, with the hope of providing a greater incentive for drivers to switch from gas to electric.  

Despite the lucrative switch to plug-ins, there are some hurdles that might keep you years away from purchasing an electric vehicle, like supply chain. According to the Wall Street Journal, China alone currently regulates 75% of all lithium-ion battery cell manufacturing. That's why Sen. Joe Manchin insists the tax credit will force automakers to move their EV supply chain away from China and to the U.S.

For consumers looking to purchase larger electric vehicles like trucks, vans and SUVs, there is a cost threshold. The cost of the vehicle must be under $80,000 to see those savings. And there are also income limits. People have to make under $150,000 to take advantage of the tax credit.  

As the temperatures rise and fall around the world, the demand to cool and heat us in extreme condition will likely grow.  

According to a study by The Climate Institute, 20% of the total electricity use in buildings around the world goes toward air conditioning units and electric fans.  

The legislation will provide a tax credit that covers 30% the cost of installing energy efficient air conditioners, water heaters, furnaces and other cooling and heating equipment. Savings could be as high as $1,200 per household.   

For low- and moderate-income households, this legislation could provide up to $14,000 to cover the upgrade cost of your appliances.  

For homes with outdated windows and doors, you can receive up to $1,200 in rebates a year to upgrade your home over the next 10 years. 

The legislation will also cover up to 30% of the pricey installation cost of a solar panel system to your home, saving you nearly $6,000.