Will the Inflation Reduction Act actually save you any money?

A sweeping piece of legislation encompassing tax, healthcare, climate, and deficit reduction provisions was signed into law by President Biden yesterday. Proponents claim it will reduce inflation in three ways: reducing the deficit, lowering healthcare costs, and lowering energy costs. While the actual effect these provisions will have on inflation (mainly driven by high food and fuel costs) is likely negligible, I've broken out the pieces that can help you on an individual level if you are a homeowner, interested in purchasing an electric vehicle, or are covered by Medicare or a Marketplace health care plan.


Homeowners:

  • up to $14,000 in rebates to purchase and install energy-efficient windows, heat pumps, and other energy-efficient home appliances and improvements

  • 30% tax credit on rooftop solar panels and geothermal heating systems

  • tax credit to install an electric vehicle charging station in your home

NOTE: Not all incentives are available to all people. Check out this cool calculator to see all of the electrification incentives available to you based on your household size, location, and income.


Car buyers:

  • up to $7,500 in tax credits for certain new electric vehicles (provision extended through 2032)

  • up to $4,000 in tax credits for used electric vehicles, begins in 2023

NOTE: The requirements to qualify for these are substantial and confusing--make extra sure you qualify before purchasing!


Medicare recipients:

  • Medicare will be allowed to negotiate some of the highest prescription drug costs beginning in 2026

  • prescription drug costs capped at $4,000/year in 2024, and then cap is lowered to $2,000 in 2025

  • insulin costs capped at $35/month, beginning in 2023

  • cost sharing will be eliminated for vaccines covered under Medicare Part D beginning in 2023

  • current requirement that enrollees pay a 5% coinsurance above the Part D “catastrophic threshold” will be eliminated in 2024

Marketplace health insurance purchasers:

  • subsidies that were part of the 2010 ACA and scheduled to end this year will now be extended for an additional three years

Other interesting provisions:

  • 15% minimum corporate income tax on companies with $1 billion or more in annual earnings (approximately 150 companies), begins in 2023

  • $80 billion to the IRS to modernize and increase enforcement on wealthy and corporate tax-dodgers

  • 1% excise tax on stock buybacks, begins in 2023

  • over $350 billion to combat climate change and invest in energy security

Is this all? Not even close. The act is over 700 pages long and while I love y'all, I'm not reading the whole thing. I've simply tried to highlight the major provisions and parts you may be able to take advantage of on an individual level. As always, if you have questions about how the new law affects your personal circumstances, consult with your financial and/or tax professional.

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