How Will the Inflation Reduction Act Help Me?
On August 16th, the Inflation Reduction Act was signed into law.
In a nutshell, the Act was designed to tackle a few areas. Namely, lower energy costs and lower healthcare and prescription costs.
By creating clean energy jobs here in the US, the Act establishes “Make it in America” guidelines for the use of American made equipment in the production of clean energy. The law will include tax credits for solar, wind power, hydrogen, nuclear, and other clean fuels. There will be additional incentives for companies that pay workers well.
Tax credits for energy related home improvements. – The bill includes a 30% tax credit for installing energy efficient windows, heat pumps, and newer appliances. There are tax credits for installing solar panels and up to $14,000 in rebates for upgrading to higher efficiency appliances.
Expanded electric car tax credits. – If you are thinking of buying an electric car, you are in luck. New tax credits are available with up to $4,000 for used electric vehicles and up to $7,500 for a new EV. There is also a tax credit for installing a charger for your electric car.
On the healthcare front, insulin costs will be limited to $35 a month for Part D Medicare participants starting next year. In 2024, overall out-of-pocket drug costs will be limited to $4,000 a year and in 2025 will drop to $2,000.
The Inflation Reduction Act is aiming to increase revenue over the next ten years by raising $737 billion through a minimum 15% corporate tax on companies that earn over $1 billion in profits and allows Medicare to negotiate directly on prescription drugs.
There is no free lunch of course, some of these changes will put a drag on corporate profits
There may also be tax credits or rebates offered in your state. Here in Massachusetts, there are rebates available as well for things like heat pumps (Up to 10k or 15k depending on the type)
Whether the Inflation Reduction Act actually lowers inflation is yet to be seen but in the meantime, if you are thinking of installing a mini split system or buying an electric vehicle, now may be the time to start planning.
Feel free to reach out to me if you have any questions. I’m here to help.
Here’s another blog article that might be of interest. Inflation. Is it good for the economy?
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All the best.
Rick Fingerman, CFP®, CDFA™, CCPS®
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.