Have you considered switching to a more energy-efficient vehicle or perhaps adding solar panels to your home? How about a new water heater? With inflation on the rise, you may have been holding off on some of these larger purchases, but the government incentives passed with the Inflation Reduction Act may just cause you to reconsider.
Following politics, especially in today’s divided times, isn’t everyone’s favorite pastime, so you may not be keenly aware of the opportunities made available by the passage of the Inflation Reduction Act. Changes to Medicare and the Affordable Care Act seem to grab the most spotlight, but you would be remiss to ignore the other main components of the legislation: energy and climate. Starting in 2023, several tax credits will be available for Americans who switch to greener energy sources.
For a more in-depth look, here are three ways you can take advantage of the Inflation Reduction Act (IRA):
1. Electric Vehicles
Many Americans have started considering moving to an electric vehicle after gas prices hit record numbers. If you’re one of them, the time to buy may be now. The IRA adds incentive by offering tax credits up to $7,500 on a new electric vehicle and up to $4,000 on a used one placed into service after Dec. 31, 2022.
Even if you weren’t already thinking about getting an electric vehicle, you may want to change your mind. It seems the writing is on the wall for gas-powered cars, as California just banned the sale of new gas-powered cars by 2035 and even Ford is shifting to electric vehicle production. And you have time. The tax credit runs through December 2032.
2. Home Efficiency Updates
Homeowners looking to upgrade their home(s) may want to take advantage of the two tax credits and two rebate programs available for certain upgrades.
Installing energy-efficient insulation or exterior doors and windows are worth a 30% tax credit up to $1,200 per year. If you update or install heat pumps, heat pump water heaters, or biomass stoves and boilers, the cap increases to $2,000. There is also a 30% tax credit for installing solar panels or other renewable energy sources like wind, geothermal, and biomass fuel. To be eligible, projects have to be finished after Jan. 1, 2023 and before 2034, and, like all tax credits, the savings can only be realized once you file your income tax return.
In addition, the IRA established rebate programs that offer either up to $8,000 or up to $14,000 but you have to make 150% or less than your area’s median income, which is established by the U.S. Department of Housing and Urban Development. The HOMES Rebate Program covers upgrades that increase your home’s overall efficiency via upgrades, such as solar panels or new windows. The High-Efficiency Electric Home Rebate Act (HEEHRA) offers rebates for switching to electric appliances and doing other electric retrofitting like:
- Electric stoves, cooktops, ranges, ovens, and clothes dryers
- Electric wiring
- Heat pump water heater
- Heat pump for space heating and cooling
- Insulation, air sealing, and ventilation
3. Prescription Drugs
Of course, the health care portions of the bill could help as well. For those old enough to be on Medicare, the IRA puts a $2,000 per year cap on out-of-pocket prescription drugs. This won’t take effect until 2025, so even those about to retire should keep their eyes open for ways to save, especially if you are diabetic. The IRA caps insulin costs at $35 a month.
Need Help?
We know that you’re used to us handling your investments and helping you with the most efficient tax strategies, but all major money decisions affect your financial plan—even if it’s just making some home or vehicle upgrades. That’s why we want you to be aware of these incentives. They won’t last long, and we’d like you to take advantage if you wish. At Platt Wealth Management, we’re always here to help, even for life’s simpler decisions, like these.
Are you on track for retirement?
Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>
Dream. Plan. Do.
Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.