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Home SCIENCE How the New Climate Law Can Save You Thousands of Dollars

How the New Climate Law Can Save You Thousands of Dollars

The Reducing Inflation Act signed into law by President Biden in August includes about $370 billion to combat climate change, some of it in the form of tax credits and rebates to help consumers save thousands of dollars on household appliances. low consumption, plug-in vehicles and renewable electricity for their homes.

But tapping into those savings will take patience and initiative.

The Biden administration has created a place designed to help you determine which cars, appliances, and home improvements will qualify for tax credits and refunds. The answers are still unclear in many cases because the programs are very new or the requirements of the law are very strict. White House officials say the website will be updated frequently as details take shape, advising consumers to sign up for email updates.

Here’s what we know so far about how to use the new law to save money. One thing all buffs have in common: each one lasts until at least 2032.

The new law extends through 2032 an existing program that allows homeowners to claim a credit on their federal tax returns for 30 percent off energy-efficient home improvements like windows and insulation. Buyers can claim up to $600 per purchase for up to $1,200 a year. To qualify for tax credits, items must have the Energy Star more efficient Certification. Homeowners can also claim a $150 tax credit for a home energy audit.

Homeowners can continue to claim a 30 percent federal tax credit on investments in renewable energy, such as rooftop solar panels or geothermal heat pumps. They can also claim a new credit for batteries intended to store electricity from renewable sources. There is no limit on the amounts that can be claimed. In 2033, the credit is reduced to 26 percent of the total purchase price and in 2034 it is reduced to 22 percent before being phased out the following year.

The law establishes new discounts for the purchase and installation of energy-efficient appliances, including air conditioners, dryers and electric induction stoves.

Reimbursement programs will be run by the states, and the amount you can receive will depend on how your income compares to the median level in your state.

If you earn up to 80 percent of your state median income, you can recover 100 percent of the cost of your energy-saving appliance or home improvement through the rebate program. If you earn 80 to 150 percent of your state median income, you can recover 50 percent of the cost, with a maximum of $8,000.

To receive reimbursement, you’ll likely need to document your income and the cost of the appliance with your state. How quickly this program is implemented and how effectively it works will likely vary by state. White House officials say they hope the federal website will direct consumers to state rebate programs as they become available.

The authors of the new law hope it will encourage Americans to use electric heat pumps, one of the most energy-efficient ways to heat and cool homes. Consumers can use a new federal tax credit to get up to $2,000 toward the purchase and installation of a heat pump, while those who meet the income requirements for their state rebate program could get up to $8,000.

The law also includes reimbursement of up to $4,000 for upgrading your home’s electrical system to install heat pumps or other energy-efficient appliances.

As with the other appliance rebates, heat pump rebates will be available through states.

The law expands an existing program that gives buyers of new electric vehicles a tax credit of up to $7,500 if the vehicle was assembled in North America, but adds new income and assembly location requirements.

Under the current program, which expires at the end of 2022, automakers that have sold more than 200,000 electric vehicles this year will not qualify for the electric vehicle credit, so buyers of cars made by General Motors, Toyota and Tesla they would not be eligible for the credit. But motorists can still receive a tax credit for some electric vehicles made by Ford, Honda and Subaru. The IRS has a complete list which cars qualify for the credit and for how much.

Starting in 2023, cars made by GM, Toyota, and Tesla will once again be eligible for the credits. But several new income requirements will apply. The credits will be available only to individuals earning less than $150,000, single heads of households earning less than $225,000, and married couples with a joint income of less than $300,000. They can be used only for sedans priced under $55,000 or trucks, vans, and SUVs priced under $80,000.

Also beginning in 2023, the credits will depend on the quantity of the vehicle assembled in the United States. You can receive a credit of $3,750 for an electric vehicle that was assembled and whose battery components were manufactured in North America. You can receive another $3,750 if the minerals used in the battery were mined in countries with which the United States has free trade agreements.

After 2024, the credit will only apply to batteries without components made in China, Russia, North Korea, or Japan. After 2025, the credit will not apply if only one ore used in the battery was mined or processed in one of those four countries.

The provision is designed to force automakers to move their electric vehicle supply chains from other countries, particularly China, to the United States.

For the first time, used electric vehicle buyers will also qualify for a tax credit, equal to 30 percent of the total cost of the vehicle and capped at $4,000. The credit will only apply to cars costing less than $25,000, and total credits are capped at $75,000 for individuals, $112,500 for single heads of household and $150,000 for married couples.

The used car must be purchased through a dealer, but there are no US-made or content requirements.

In 2022 and 2023, you can claim the new electric vehicle tax credit on your federal income tax form, but starting in 2024, you can transfer the credits directly to the dealer to receive them in cash at the time of purchase.

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