Today President Joe Biden signed the Inflation Reduction Act, a major bill that represents the largest investment in climate action in US history. It puts close to $400 billion to boost domestic production of clean energy technology and generally retrofit the US to survive climate change. If all goes to plan, the act will reduce US emissions by 40% by 2030.
In Uncle Sam’s immortal quote, the bill screams: “I Want You”… to fight the fight against climate change. The bill is packed with tax credits and discounts for Americans to buy electric vehicles (EVs), install heat pump and better insulationand slap solar panels on their roof. We’re talking thousands upon thousands of dollars per household. In turn, all these additional investments in green technology will boost the market, further accelerating the transition to a cleaner economy.
“It’s basically just a green light for everyone — for consumers, for the companies that make these products, for building owners, for utilities, everyone— to begin doing this work,” said Ben Evans, federal legislative director of US Green Building Council, a nonprofit that promotes sustainability. “And we think that is really going to change these markets. I don’t think it’s an exaggeration to call this history.”
It’s a sneaky way to encourage mass action on climate change: If homeowners across the U.S. made their homes more efficient, we’d cut our carbon emissions, by a lot. time. One Thursday of both national energy use and CO2 emissions come from houses. “What this bill does is, in many ways, at least as psychological as economics,” said Gernot Wagner, a climate economist at Columbia Business School. “Do you have your average conversation with your contractor about: Wait, should I really install a gas boiler here, given the rather high gas prices?”
“The obvious thing to do,” added Wagner, “could be spending a little extra today on things that literally pay for itself within a few months. So you can save 50% of your electricity bill if you insulate the place better.”
Failed to legislate meaningful action on climate change with — heaven forbid — a fact get rid of fossil fuels, the Feds have switched to the tax code, using public money to fund the public good of mass decarbonisation. Sure, taxes are no fun, and tax credits sound even more confusing. But it’s actually quite simple for you to get your share of the Inflation Reduction Act.
First of all, a tax credit is not the same as a tax deduction – it is even better. With the latter, you can reduce your taxable income, for example, from $65,000 to $60,000. That means the government doesn’t cut that $5,000. In contrast, a tax credit would be to get you the full $5,000 back. So if you owe the government $10,000 after taxes, and you get a $5,000 credit, you end up paying only $5,000.
The Inflation Reduction Act provides tax credits for energy-efficient housing improvements: new windows, doors, insulation, water heaters. So when you file your taxes, you get a discount on what you owe the feds. “Say you spend $1,000 on insulation—you should be able to get a tax credit of 30% of that,” says Evans. “So a $300 tax credit, goes directly to what you owe in taxes. So at the end of the year, you owe $5,000 in taxes, you reduce that $300, and you owe only $4,700. “
This is a significant boost from previous offers for home improvements, which credits 10% of the cost up to $500 for a home improvement, says Evans. your whole dear life. It’s now 30 percent purchases, a tax credit of up to $1,200 per year starting January 1, 2023 and running through 2032. So you can be credited for new windows next year, next insulation, next leakproof door, etc.
For solar, the bill expands an existing federal tax credit, including 30% of residential solar spending, through 2032. That credit drops to 26% the following year, 22 % in 2034 and expires at the end of that year .