What You Need to Know about the Inflation Reduction Act (IRA)
There is a great deal of buzz surrounding the recently signed Inflation Reduction Act, but homeowners are still trying to figure out how it will benefit them. The overarching goal of the Inflation Reduction Act is to help people deal with the rising cost of living, and it focuses on lowering health care and prescription drug costs and battling climate change.
While many would love to see lower healthcare costs, it is an eco-friendly initiative that can help property owners and businesses save on their taxes. By joining the electrification movement, you can save green by going green.
Here is what you need to know about how the Inflation Reduction Act can help lower your tax bill.
What Is the Inflation Reduction Act?
Many consider the Inflation Reduction Act to be one of the most impactful accomplishments of the Biden administration. The overall goal is to relieve citizens battling inflation’s current rise in prices. While periods of inflation are normal for healthy economies, the impact can be difficult.
What is in the Inflation Reduction Act?
The IRA starts with a plan for prescription drug reform that should allow Medicare to negotiate certain drug prices. It also created an extension subsidy for the Affordable Care Act (ACA) to help Americans maintain health care. Outside of healthcare, the IRA also makes a 15% corporate minimum tax rate for organizations with at least $1 billion in income and invests in the IRS.
While the healthcare and tax reforms in the IRA have the potential to impact billions positively, the green initiatives are expected to create incredible opportunities to save come tax time. Property owners can earn a hefty tax rebate for renewable energy upgrades, like adding solar panels, upgrading to a smart electrical panel, or even buying an electric vehicle. Homeowners could earn up to $14,000 in tax breaks just by joining the electrification movement and battling climate change.
The benefits of electrification go beyond energy security and sizable tax breaks. Taking advantage of the electrification rebates allotted under the Inflation Reduction Act will also give you a more eco-friendly home/business and lower utility bills. With over 100 million homes expected to save over $37 billion on their electric bills alone, going green is a win-win.
3 Ways You Can Lower Your Tax Bill Through the Inflation Reduction Act
Many homeowners and businesses would love to take steps to electrify their properties, but they worry that they do not have available funds to invest. Even if adding solar panels today would save you thousands tomorrow, you still need money upfront to complete the upgrade.
That’s where the IRA hopes to encourage property owners to leap electrification. By offering various tax benefits and rebates, the government is helping to cover the cost of critical upgrades to homes and businesses across the country.
Here are just some of the ways you can enjoy the benefits of electrification and save on your tax bill.
Buy an Electric Car
If you have been paying attention to the auto industry, you will see that nearly every major auto brand is investing in creating electric vehicles. These EVs have come a long way since the first models hit the road. Newer EVs are faster, more powerful, and sleeker than many other cars on the road.
To help shoppers cover the cost of going electric, the IRA allows for a $7,500 tax rebate for a brand-new electric vehicle. Drivers can also earn up to $4,000 for a used EV. Unlike other tax rebates that only apply during tax season, this program happens at the time of purchase.
Shoppers can also extend their savings by adding a Level 2 EV charger to their home or business. The IRA allows up to 30% of your equipment and installation costs up to $1,000 for residential properties and $30,000 for businesses. While the EV incentive does not start until 2023, the electric vehicle charging station program is retroactive through all of 2022.
Replace Your Appliances
Did you know that gas stoves leak methane, even when not in use? The pollution produced by mere gas-powered ovens is equivalent to the pollution created by nearly 500,000 gas-powered vehicles.
It might be time to replace that old gas stove with a more efficient electric range. The IRA provides a rebate of up to $840 for an electric stove, cooktop, range, or oven. Depending on the model you choose, this rebate could cover most, if not all, of the price of the updated cooking equipment.
You can also earn a rebate of $840 for a heat-pump clothes dryer and $1,750 for a heat-pump water heater. If you are looking to make an upgrade to your current appliances, it has never been a better time to do so.
Upgrade Your Electric
Older homes often contain outdated or unsafe electrical panels, and these old, 100-amp panels cannot handle the modern needs of an electrified home. In some cases, the old panels are so outdated and inefficient that they cost property owners or make a property unsafe.
Under the IRA, homeowners can earn up to $4,000 for upgrading their electrical panels. Not only will a new panel be safer for your property, but it will also ensure that your home is future-proof.
While you have an electrician looking at your panel, it might be time to upgrade your property’s electrical wiring. The Inflation Reduction Act allows up to a $2,500 rebate for electrical wiring upgrades.
Many older homes will have to upgrade elements of their electrical grid before new tech like smart electrical panels, microgrids, home EV chargers, and electrical appliances can safely be installed.
Let Watson’s Charging Stations & Electric Be Your Electrification Partner
Thanks to the rebates and incentives offered through the Inflation Reduction Act, there has never been a better time to update your home or business with electric technology. At Watson’s Charging Stations & Electric, we can help you take advantage of the various electrification tax programs while providing top-notch service every step of the way.
If you are in the Gilroy, CA, or Santa Clara Valley area and are interested in learning more about electrification upgrades or any other electrical work, make sure to contact us to schedule your complimentary consultation today.
*Please work with your CPA or tax professional to ensure you can take full advantage of tax incentives.