The evenly divided U.S. Senate passed a historic $740 billion reconciliation bill—the Inflation Reduction Act (IRA)—packed with clean energy investments, health care reform, and tax incentives. Despite Republican efforts to stifle its passage, Democrats prevailed, repelling over 30 amendments aimed at faltering the legislation during last weekend’s “vote-a-rama”.
The IRA passed with a 51-50 party-line vote, with Vice President Kamala Harris casting the tie-breaker. President Joe Biden called this bill ” the largest investment ever in combatting the existential crisis of climate change,” and experts posit that the IRA will raise over $700 billion in government revenue over the next 10 years. The Inflation Reduction Act is expected to pass the House this Friday, August 12th, and receive President Biden’s signature thereafter.
Here’s a look at how consumers can benefit from the IRA through tax rebates, electric vehicle credits, and energy-efficiency savings.
Tax Credits
To encourage the transition from gas-powered vehicles, the IRA includes tax rebates for electric vehicles: a $7,500 rebate on new EVs and a $4,500 tax credit for used EVs. Couples that earn less than $300,000 a year and individuals who earn less than $150,000 a year are eligible for these benefits. These rebates will likely be in effect later this year.
Additionally, there are no new tax increases for individuals earning $400,000 or less annually.
Medicare
New health care provisions allow Medicare to negotiate drug prices and cap annual out-of-pocket costs at $2,000 for Medicare recipients. In 2026, Medicare will begin negotiating the prices of the 10 most expensive drugs, with a cap of 20 price negotiations in 2029. According to the Congressional Budget Office, Medicare could save $101.8 billion over 10 years through drug price negotiation.
Additionally, the IRA extends subsidies, included in Biden’s Covid relief bill, for the Affordable Care Act, which were set to expire in 2023, for three more years. The bill also caps out-of-pocket insulin expenses at $35 a month for Medicare recipients.
Energy Savings
In order to increase the nation’s reliance on renewable energy and promote energy efficiency, the IRA includes various energy and climate provisions.
- The Home Energy Performance program provides $4.28 billion in home rebates, including electrification rebates of up to $1,750 for heat pump water heaters and up to $8,000 for heat pump systems for heating, ventilation, and air conditioning (HVAC).
- The Energy Efficient Home Improvement credit allows households to deduct 30% of the cost of energy efficiency upgrades from their taxes, including heat pumps, insulation, and more.
- The Residential Clean Energy credit also allows for a 30% tax deduction of the cost of solar projects, including solar installation and home battery storage.
- The High Efficiency Electric Home Rebate Act (HEEHRA) provides an additional $4.5 billion in direct rebates for low to moderate-income households for the installation of new energy-efficient appliances up to $14,000.
Rewiring America estimates that households that take advantage of these provisions and install modern electric heat pumps, convert to EVs, and install rooftop solar can save up to $1,800 per year on energy bills.
***
The historic passage of the Inflation Reduction Act allows for millions of consumers to benefit from energy savings, tax rebates, and health care reform. However, the IRA has more to offer, as there are additional provisions that will dramatically impact the nation such as climate incentives and corporate tax reform.