In the year Dubbed the Inflation Reduction Act of 2022, the agreement includes several incentives, such as tax credits for electric vehicles, or EVs, and sustainable home improvement efforts, which can help households change their energy consumption and use and help individuals who want to make greener choices.
Leah Stokes, associate professor of environmental politics at the University of California, Santa Barbara, said the law “has the potential to be transformative.”
“The bill makes it more affordable for everyday Americans to buy clean technology,” Stokes said. She added that the incentives would help address some of the upfront costs associated with investing in sustainable innovations such as EVs or energy-efficient heat pumps. In turn, Stokes and other experts emphasize, many Americans can expect significant reductions in their total energy costs.
If households invest in climate-friendly and energy-efficient technologies, funding from the bill could help the average household save $1,800 on its annual energy bill, according to an analysis by Rewiring America, an electrification nonprofit. Another analysis by the Clean Energy Research Tank (RMI) shows that tax incentives for clean energy sources will boost the use of wind and solar over the next decade, saving American households up to $5 billion over two years.
Here is a list of several key incentives that can have practical and direct benefits for you. However, keep in mind that, depending on individual circumstances, there are limits and eligibility requirements that determine how much you can benefit from some grants.
Tax credits for electric vehicles
Many buyers of new and used electric vehicles receive tax credits.
A real “game changer,” Stokes said, the bill also removes a previous restriction that prevented manufacturers of popular EVs from issuing tax credits after selling certain vehicles.
A $7,500 tax credit for new electric vehicles can be applied at the point of sale. Buyers of used EVs may qualify for up to a $4,000 credit.
Joe Britton, executive director of the Zero Emissions Transport Association, said the new credit for EVs he already owns could be instrumental in helping the country move away from fossil fuel-powered vehicles.
“It’s going to be one of the really invisible incentives,” Britton said, adding that about 70 percent of Americans aren’t in the market to buy a new car.
“Because once they get behind the wheel of an EV, 95 percent are more likely to go back,” Britton added. “
While there’s been talk that paying non-EV drivers to get off the road might be a better approach, the bill’s provisions are probably “too simplistic,” said Steven Nadle, executive director of the American Council for an Energy-Efficient Economy. “Vehicle retirement programs get complicated.”
Although tens of millions of Americans can benefit from these tax credits, there are eligibility requirements.
For new EVs, the tax credit applies to earnings below $300,000 for a “joint return or surviving spouse,” $225,000 for head of household filers and $150,000 for single filers. For used EVs, revenues for the same categories cannot exceed $150,000, $112,500 and $75,000, respectively.
There are also limits on how much the vehicle can cost.
“If you want to buy an electric Lamborghini, sorry, it won’t qualify,” Nadel said.
To qualify for the credit, new vans, SUVs or pickup trucks can’t cost more than $80,000, while other types of vehicles can’t cost more than $55,000. Used EVs may qualify if their value does not exceed $25,000.
Britton said the credit also depends on manufacturers making eligible vehicles. But he noted that the bill includes funding to help achieve those goals.
Clean energy and efficiency incentives
The bill contains several incentives, including rebate programs and tax credits, designed to encourage home improvements that increase energy efficiency and use more clean energy technologies.
For example, the HOMES rebate program rewards eligible households for energy savings, Nadel said. People typically get $2,000 if they make changes that save 20 percent or more of their overall energy costs And $4,000 if you save 35 percent or more. Those amounts may increase for low- or moderate-income families, which the bill defines as individuals or families whose total income is less than 80 percent of the median income in their area. Families in underserved communities also qualify for incentives.
Additionally, the bill encourages home electrification projects and efficiency improvements. Qualified persons installing heat pumps for space heating or cooling; Heat pump water heaters; Electric pump clothes dryers; Or electric stoves, cooktops, stoves or ovens, among other technologies, can benefit from rebates and tax credits.
Furthermore, other home improvements such as improving insulation, air sealing or ventilation may also be subsidized to help increase energy efficiency.
The law supports residential and community solar.
A previous loan for residential solar projects was set to expire at the end of 2023, but if it does, the Through 2032, the bill would set a 30 percent credit for households installing solar panels with a subsequent two-year abatement period.
“That’s a big number,” Erin Duncan, vice president of congressional affairs for the Solar Energy Industries Association, said of the 30 percent credit. Duncan said the provisions included in the bill “will allow the industry as a whole to be more predictable about what they can offer to consumers and allow consumers to make choices based on what’s best for them.”
Other parts of the deal will help make it easier for community solar projects — or projects in which multiple community members invest in and use them — to move forward, she added. “Community solar can be incredibly important in democratizing who can participate in this energy choice.”
Funding for affordable housing improvements
The deal also provides financial assistance to owners or qualified affordable housing owners, including a $1 billion grant program to make properties more energy and water efficient.
Some eligible projects include addressing climate resilience and improving indoor air quality or sustainability, using low-emission technologies including zero-emission electricity generation, energy storage or building electrification.
If affordable housing can be renovated with the bill’s funding, Nadel said, that means “tenants in those apartments will have more modern, comfortable, energy-efficient apartments” and lower energy bills.
Overall, experts have largely praised the climate deal, urging lawmakers to act quickly so people can take advantage of these incentives to pass the law.
“For consumers, this is a sea change in a very positive way that will help our communities become more resilient and manage our costs,” Duncan said. We create a lot of jobs for our neighbors or ourselves so I think it’s really fun.
