The Inflation Reduction Act of 2022

In August 2022, President Joe Biden signed into law the Inflation Reduction Act (IRA), historic legislation that will invest $750 billion into climate, energy and health care over the next decade. After having the climate-focused Build Back Better agenda blocked by West Virginia Senator Joe Manchin, the Inflation Reduction Act was a big win for the Biden administration’s climate action agenda, and represents the single largest investment into climate, clean energy and jobs in U.S. history.

The Inflation Reduction Act will spur massive clean energy deployment at the utility scale and help lower costs for consumers. The investments spelled out in the IRA will help jumpstart a necessary revolution in clean energy manufacturing and give us a window to fight back against future fossil fuel development. Overall, the package – as it currently stands – will cut U.S greenhouse gas emissions by 37 to 41 percent.  Additionally, it is estimated that the legislation will save 3,9000 lives annually by 2030 and create up to 1.5 million jobs nationwide and 167,000 jobs in Michigan over the next decade.

How Can the Inflation Reduction Act Lower My Energy Costs?

At the heart of the bill’s clean energy provisions lie clean energy tax credits, which are integral to reducing emissions and cleaning up our air. Clean energy tax credits will provide financial incentives for increasing clean energy manufacturing and building out clean energy infrastructure, as well as incentives for industrial facilities to reduce emissions. The investments also include funding for key conservation projects, rebates for home electrification and up to $7,500 for consumers to purchase electric vehicles. So how can this reduce your bill?

Saving on Energy Costs at Home

The Inflation Reduction Act has the potential to lower energy costs for American families by $1,800 annually by allowing consumers to take advantage of rebates and tax credits. Consumers can take advantage of these potential savings by:

  • Installing a modern electric heat pump to replace their furnace
  • Installing a heat pump for water heating
  • Converting to an electric vehicle
  • Installing rooftop solar

Despite upfront costs, the potential savings made possible by these rebates are an opportunity for more consumers to modernize their homes with electric and solar.

Consumer rebates spelled out in the Inflation Reduction Act are also broken down by household income. Low income households qualify for rebates of up to:

  • $8,000 for a heat pump furnace replacement
  • $1,750 for a heat pump water heater
  • $840 for an electric stove
  • $840 for an electric clothes dryer

Moderate income households can receive rebates for 50% of these costs. Households above income thresholds can deduct 30% of the costs from their taxes limited to $1,200 per year and $600 per item.

Electric Vehicle Rebates

The Inflation Reduction Act also includes tax credits for electric vehicles. The Electric Vehicle tax credit provides up to:

  • $7,500 off of a new electric vehicle
  • $4,000 off a used electric vehicle

Despite tax credits only being available for electric vehicles made in the United States, the Inflation Reduction Act’s EV incentives have the potential to increase demand for electric vehicles across the country. It is imperative that domestic automakers quickly develop a supply chain to build EVs that qualify to keep up with demand. With our rich history in auto manufacturing and recent deals with Ford and GM, Michigan is poised to take advantage of the current electric vehicle manufacturing landscape and become a national leader, in turn helping consumers take advantage of the IRA’s EV tax credits.

Check out the White House’s Clean Energy For All website for information, resources and tools you can use to see how the Inflation Reduction Act can help you save on energy costs.

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