Home Business How the new climate law could save you thousands of dollars

How the new climate law could save you thousands of dollars

by SuperiorInvest

The Inflation Reduction Act The law signed by President Biden in August includes about $370 billion to fight climate change, some of it in the form of tax credits and rebates to help consumers save thousands of dollars on energy-efficient appliances, plug-in vehicles and renewable electricity. homes.

But taking advantage of these savings will require patience and initiative.

The Biden administration created a Website designed to help you find out which cars, appliances and home improvements will qualify for tax credits and rebates. The answers are not yet clear in many cases because the programs are so new or the requirements of the law so strict. White House officials say the website will be updated frequently as details take shape and advise consumers to sign up for email updates.

Here’s what we know so far about how to use the new law to save money. All benefits have one thing in common: Each of them will last at least until 2032.

The new law extends through 2032 an existing program that allows homeowners to claim a credit on their federal tax return of 30 percent for home energy efficiency improvements such as windows and insulation. Buyers can claim up to $600 per purchase up to $1,200 per year. To be eligible for tax credits, the items should have Energy Star most efficient certificate. Homeowners can also claim a $150 tax credit for a home energy audit.

Homeowners can still claim a 30 percent federal tax credit on renewable energy investments, such as rooftop solar panels or geothermal heat pumps. They can also now claim credit for batteries designed to store electricity from renewable sources. There is no limit to the amounts that can be claimed. The credit will drop to 26 percent of the total purchase price in 2033 and 22 percent in 2034 before being phased out the year after that.

The law introduces new discounts for the purchase and installation of energy-saving appliances, including air conditioners, dryers and electric induction cookers.

Rebate programs will be run by states, and the amount you can receive will depend on how your income compares to the median in your state.

If you earn up to 80 percent of your state’s median income, you can get 100 percent of the cost of your energy-saving appliance or home improvement back through the rebate program. If you earn 80 to 150 percent of your state’s median income, you can get 50 percent of the costs back, up to a maximum of $8,000.

You’ll likely need to document your income and appliance expenses with your state to get the rebate. How soon this program will be implemented and how smoothly it will operate will likely vary by state. White House officials hope the federal website will direct consumers to state rebate programs as they become available.

The authors of the new law hope to push Americans to use electricity heat pumps — one of the most energy-efficient ways of heating and cooling homes. Consumers can take advantage of the new federal tax credit to receive up to $2,000 toward the purchase and installation of a heat pump, while those who meet income qualifications for their state rebate program can receive up to $8,000.

The law also includes a rebate of up to $4,000 for upgrading your home’s electrical system to install heat pumps or other energy-efficient electrical appliances.

As with other home appliance rebates, heat pump rebates will be made available through the states.

The law expands an existing program that gives buyers of new electric vehicles a tax credit of up to $7,500 if the vehicle was assembled in North America, but adds new income and assembly location requirements.

Under the current program, which expires at the end of 2022, automakers that sold more than 200,000 electric cars this year won’t be eligible for the electric car credit — so buyers of cars made by General Motors, Toyota and Tesla wouldn’t qualify. credit. However, motorists can still get a tax rebate on some Ford, Honda and Subaru electric vehicles. The IRS has a complete list which cars are eligible for credit and for how much.

From 2023, GM, Toyota and Tesla cars will again be eligible for credits. However, several new income requirements will apply. Credits will only be available to individuals with an income of less than $150,000, single heads of household with an income of less than $225,000, and married couples with a combined income of less than $300,000. They can only be used on sedans under $55,000 or trucks, vans and SUVs under $80,000.

Starting in 2023, the credits will also depend on how much of the vehicle was assembled in the United States. You can get a $3,750 credit for an electric vehicle that was assembled and its battery components were made in North America. You can get an additional $3,750 if the minerals used in the battery were mined in countries with which the U.S. free trade agreements.

After 2024, the credit will only apply to batteries without components made in China, Russia, North Korea or Japan. After 2025, the credit will not apply if even one mineral used in the battery was mined or processed in one of these four countries.

The provision is intended to induce automakers to shift their electric vehicle supply chains from other countries, particularly China, to the United States.

For the first time, buyers of used electric vehicles will also be eligible for a tax credit equal to 30 percent of the total cost of the vehicle, capped at $4,000. The credit will only apply to cars that cost less than $25,000 and total credits are limited to $75,000 for individuals, $112,500 for single heads of household and $150,000 for married couples.

A used car must be purchased through a dealer, but there are no made-in-America or content requirements.

In 2022 and 2023, you can claim the New Electric Vehicle Tax Credit on your federal income tax return, but starting in 2024, you can transfer the credits directly to the dealer to receive them in cash at the time of purchase.

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