With the signature of President Joe Biden Inflation Reduction Act entered into force on August 16, it marks one of the biggest spending packages in american history at $750 billion, per CNN. A total of $430 billion will be spent on tackling climate change, cutting prescription and health care costs, and enacting tax reform.
The new legislation provides a number of ways for American families to save money, including investing in certain green measures such as electric vehicles and solar panels. But in the language of the law, it hasn’t been entirely clear which provisions are rebates that put money back in consumers’ pockets at the point of purchase — and which are tax credits that it must take advantage at the time of deposit.
Rebate: Energy-efficient appliances
Although it will take some time to implement, in the coming years there will be point-of-sale rebates for certain energy-efficient appliances.
Consumers can save up to $8,000 for a heat pump system, up to $1,750 for a heat pump water heater and up to $840 for the conversion to a range/cooktop/ electric oven, as well as the same amount for an electric water heater. pump dryer for laundry. There are also options of up to $4,000 for upgrading circuit breaker boxes, up to $2,500 for installing (or upgrading) electrical wiring, and up to $1,600 for insulation, air sealing and ventilation upgrades.
Any delays may be because states will have to institute a reimbursement system tied to demand for the money, as noted by NPR — who spoke to Lowell Ungar, director of federal policy at the American Council for an Energy-Efficient Economy. Reimbursement amounts will be offered on a sliding scale, with more funds allocated to lower-income families, per NPR.
In the meantime, however, achieving many of these improvements can provide a maximum tax credit of 30% until 2032, and the credit is retroactive (from 2022) if you have already taken these steps. detailed News Nation.
Tax credit: purchases of electric cars
If you are looking for an electric vehicle, you can obtain a tax credit the year of your purchase: up to $4,000 for a used electric vehicle and up to $7,500 for a new one. model.
It’s important to note, however, that there are strict criteria for the credits – including the fact that a high percentage of materials must be made in the USA for a particular model to qualify. Additionally, there are limits on the sticker price for the vehicle (up to $55.00 for sedans and $80,000 for trucks/SUVs) with respect to purchase credit eligibility .
Tax Credit: Solar Panels
Upgrading your home to run on clean energy can offer great incentives from 2023. If you install solar panels, for example, you can qualify for a 30% tax credit on the relevant costs at the end of the year – this percentage ceiling remains intact until 2032, and drops by a few points in the following years.
The Center for Sustainable Energy notes that a solar home system can cost around $15,000 to $25,000, so the new credit can be significant. These credits are retroactive, so if you’ve installed this type of home modification before, you might be in luck.
Inflation Reduction Act: Medicare and ACA Insurance
There are also ongoing automatic savings under the Inflation Reduction Act, particularly in health care. Medicare Part D beneficiaries will see an $2,000 cap on prescriptions each year, and those with health insurance under the Affordable Care Act will notice up to $800 in reduced annual premium costs. .
To pay for the $430 billion spending package, the government will target wealthier corporations to pay more taxes – with the Biden administration promising that no individual or family earning less than $400,000 will see a increase in its tax rates.
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This article originally appeared on GOBankingRates.com: Curbing Inflation Act: How Much Savings Are Instant Rebates vs. Tax Credits?