Clean Energy Incentives and Rebates Americans Will Be Able to Take Advantage of Thanks to Inflation Reduction Act
Despite steady opposition to many pieces of his own party’s legislation during this time of high inflation, Sen. Joe Manchin (D-VA) has had something of a change of heart — bringing a proposed tax, health and climate bill back to life.
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Details of the $739 billion Inflation Reduction Act of 2022 were worked out by Manchin and Senate Majority Leader Chuck Schumer (D-NY) last week amid criticism from opponents who question the point of legislation that doesn’t lower inflation until nine years from now. Moody’s Analytics chief economist Mark Zandi suggested that the best-case result of the legislation (regarding inflation) is a 0.33% reduction of inflation by 2031, according to the New York Post.
Whatever the impact the act will have on inflation years from now, the Inflation Reduction Act promises heavy investment in corporate tax and IRS tax enforcement reform and Medicare drug pricing improvements. The Inflation Reduction Act also features an Affordable Care Act extension and funds a dedicated effort to battle climate change.
According to a related Senate Democrats fact sheet, the largest expenditure, $369 billion, will go toward investing in “Energy Security and Climate Change programs over the next ten years.”
Electric Vehicles and E-Bikes
Per Accounting Today, the new legislation proposes consumer tax credits for both new and used “clean cars” and amends current rules concerning eligible household salaries (as well as caps on eligible types and price points regarding electric vehicle purchase credits).
If you make under $150,000 — or have a combined family income under $300,000 — you can get a $7,500 tax credit for qualifying new electric vehicles. The credit is applied at the time of sale, not as a tax-time filing reduction.
Additionally, whereas existing EV tax credits phased out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States (Tesla, General Motors and Toyota phased out long ago), the bill does away with that threshold and instead places price limits on electric vehicles.
Larger EVs like SUVs, trucks and vans need to cost less than $80,000 to qualify for the credit, while smaller electric cars need to be priced at $55,000 and below.
For used electric cars, a $4,000 credit is available to anyone buying one for under $25,000 from a dealer — as long as you’re an individual making up to $75,000 a year, or are a couple making less than $150,000 a year who file joint tax returns. As Accounting Today noted, almost three in four cars bought in the U.S. are used, so the impact of the proposed legislation will likely be substantial.
“This is something we’ve always said is a sleeper issue,” said Andres Hoyos, vice president of the Zero Emission Transportation Association. “It’s going to be a game-changer for mass adoption.”
Less enthusiastic are electric bike manufacturers and users. Per Bloomberg, sales of e-bikes continue to flourish since the pandemic boom, partially due to high fuel prices. However, the Inflation Reduction Act doesn’t provide credits or incentives for e-bikes, something that has electric bike proponents irritated.
Quoted in Accounting Today, Noa Banayan — director of federal affairs, People for Bikes — stated: “It just continues to support auto-centricity and doesn’t help with mode shift.”
Home-Efficient Electrification, Heat Pumps and Solar Panels
There are plenty of incentives available to low- and moderate-income homeowners looking to save money while they renovate, or make their homes more energy efficient.
Qualified electrification projects include heat pump water heaters (up to $1,750 rebate), heat pump HVAC systems (up to $8,000 rebate) and electric load service panels and electric appliances (up to $840 in rebates). Additional rebates are available for upgrading electrical panels (up to $4,000 rebate), insulating and sealing a house (up to $1,600 rebate) and improving wiring (up to $2,500 rebate), per Accounting Today.
The $4.28 billion High-Efficiency Electric Home Rebate Program is providing the rebates and will be administered by each state. The program runs through Sept. 30, 2031, and has a maximum rebate total of $14,000. To qualify for these rebates, a household income must not exceed 150% of the area median income as calculated by the Department of Housing and Urban Development.
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Finally, homeowners who install residential solar panels or solar battery systems (with at least 3 kilowatt-hours of capacity) will qualify for a 30% tax credit for installations until Dec. 31, 2034. However, this credit dips to 26% for installations after Dec. 31, 2032 and before Jan. 1, 2034.
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