8 ways the Inflation Reduction Act can save you money
What if you could fight climate change and save money at the same time?
The combination of rebates and tax credits included in the recently passed Inflation Reduction Act help you do exactly that. In fact, one analysis estimates that the new law’s residential tax credits alone could save more than 100 million households $37 billion a year on their energy bills.
We found eight places around your home where you could start saving money.
1. In the driveway
The new law rewards qualifying electric vehicle buyers with a tax credit of up to $4,000 for the purchase of a used EV and up to $7,500 for a new car. In 2024, the credit will be issued through dealerships at the time of sale — and since some models already sell for less than $30,000 — it makes EVs cheaper than ever, especially when you consider that the average household spends hundreds of dollars per month on gasoline. There are caveats. For example, EVs must have final assembly in North America to qualify, so some brands will not be able to offer the credit until their North American plants begin operating.
2. At your thermostat
Natural gas prices have taken consumers on a wild ride over the past few years, with some households facing astronomical heating bills during winter storms. The clean energy incentives in the Inflation Reduction Act tackle this problem by supporting a grid-wide move to cheaper, cleaner sources of electricity, reducing both the cost to consumers and pollution. That means a typical American household will save up to $220 per year over the next decade without having to change a thing.
How the IRA will help families and communities outside the home too
3. In the utility room
To green your home’s infrastructure, the new law offers rebates to help defray upfront costs, prioritizing funds for families with low and moderate incomes. For example, consumers who invest in an energy-efficient heat pump water heater will be eligible for a rebate of up to $1,750. An upgraded breaker box (to help prepare for an all-electric home) may be eligible for a $4,000 rebate. (However, it’s important to note that, even with the rebates, advocates worry that some households still will not be able to afford efficiency upgrades.) To find out which discounts, rebates and tax credits your household is eligible for, consult this online calculator.
4. In the kitchen
A Stanford University study recently found that gas stoves leak methane, a potent greenhouse gas, even when they aren’t being used. The researchers estimated that stoves across the U.S. emit as much climate pollution as about 500,000 gas-powered cars. The Inflation Reduction Act provides for a rebate of up to $840 for an electric stove, cooktop, range or oven to make the purchase more affordable.
5. In the insulation
Adding insulation is a tried-and-true way to prevent wasted energy and save money. With the passage of the Inflation Reduction Act, some households are now eligible for a rebate of up to $1,600 just for improving their home’s insulation and sealing energy leaks — and that’s on top of the savings better insulation will yield on monthly utility bills. (The rebate for households with moderate incomes covers 50% of these costs). Find out if you qualify here.
6. In the laundry room
Heat-pump clothes dryers, which are popular in Europe, but rarely used in the U.S., are an energy-efficient alternative to traditional dryers. Instead of releasing warm, humid air outside, a heat pump dryer sends moist air through an evaporator, and then recirculates the dry hot air. The process takes a bit longer to dry clothes but only uses about half the electricity. The new law encourages consumers to switch to an electric heat pump dryer with a rebate up to $840. Check if you’re eligible here.
7. At the AC unit
What if there were a more efficient way to keep your home comfortable? Consider a heat pump. It can both heat and cool your home, and uses less energy overall. Households can qualify for a tax credit of up to $2,000 for the purchase of an electric heat pump. And for households with low incomes, the new law provides a rebate of up to $8,000 on installation. (For the tax credit program, the incentives apply to equipment installed on January 1, 2023, or later.)
8. On the roof
There has never been a better time to add solar panels to your home. The Residential Clean Energy Credit included in the new law provides a tax credit of up to 30% to households that invest in clean energy such as solar, and it’s retroactive to the beginning of 2022. Considering that the average cost of installing a residential rooftop solar-powered system is about $19,000 — that’s $5,700 in savings. Beyond that, the average solar-powered home saves about $300 every year on electricity.
Timing and availability will vary by state. To find out which programs and incentives have been rolled out in your area, check here.
This article is part of an ongoing series exploring the benefits of the IRA.