New tax credits (and more) are on the way. Here’s what it could mean for your finances.

1. Energy-efficient home improvements: Tax credits and rebates

A big part of the Inflation Reduction Act focuses on supporting clean energy production; in fact, it’s the most significant piece of federal legislation to address climate change.1 That includes providing incentives for consumers in the form of tax credits and rebates that not only make “going green” easier and less expensive, but also help reduce your energy bills.

If home improvements or replacing your old appliances with new, more energy-efficient models are on your to-do list, these new financial incentives could make that task easier on your budget.

• You can take advantage of a tax credit equal to 30% of what you spend on qualified energy-efficiency improvements like windows, doors and insulation, or energy-efficient appliances that heat or cool your home, such as water heaters and heat pumps. The tax credit also applies to home energy audits that help you determine which improvements could help you save the most energy and money.
• A tax credit for the installation of solar panels was increased to 30% and extended through 2032.
• Rebates based on reduced energy consumption. For example, if your household makes energy-efficient changes that reduce energy usage by at least 35%, you could be eligible for up to $4,000 in rebates.
• Rebates of up to $14,000 for low- and middle-income families who purchase energy-efficient electric appliances to help reduce their home energy use, like stoves and clothes dryers.2 The rebates can range from $840 for an electric stove to $8,000 for a heat pump.
• Tax credits versus rebates — what’s the difference?
  A rebate is typically a reimbursement you get when purchasing the item. A tax credit is an amount you subtract from what you owe when you file your taxes. It’s a good idea to consult with your tax advisor to ensure you’re taking advantage of any available tax credits.

Some items noted above may have annual credit caps, and some rebate programs are still being implemented and aren’t yet available. In the meantime, you can start thinking about your current energy usage and what energy-efficient upgrades make the most sense for your family — so you can take advantage of any financial incentives that can help lower your energy bills.

2. Electric vehicle (EV) tax credits

If you’re car shopping, you now have more of an incentive to consider an electric vehicle, since tax credits have been expanded for qualifying EVs: A $7,500 tax credit for new and a $4,000 credit for used. Income and vehicle sales price restrictions may apply.

3. Healthcare savings

The Inflation Reduction Act will continue to save millions of Americans an average of $800 per year on health insurance premiums.² In addition, millions of Americans who are Medicare recipients will soon see lower costs and automatic savings:

• Lower prices on Medicare premiums³ and on many prescription drugs²
• Out-of-pocket costs for prescription medications will be capped at $2,000 per year²
• Out-of-pocket insulin costs for those with diabetes capped at $35 per month²

4. Investments in tax reform

The Inflation Reduction Act includes investments in the Internal Revenue Service (IRS) to provide consumers with:

• Faster tax filing and tax-return processing
• Faster refunds
• More responsive IRS agents and customer service representatives
• No federal tax increases for anyone making under $400,000 per year¹