Inflation Reduction Act and the Tax Incentives for Consumers
The Biden administration recently passed one of its more significant pieces of legislation—the Inflation Reduction Act of 2022. However, many debate whether a bill that includes almost $500 billion in new spending will do much for inflation in the short term. Proponents of the bill claim that the increased taxes derived from corporations and IRS enforcement will reduce the budget deficit.
The purpose of this post is not to get into a political discussion about whether this new bill will reduce inflation and the budget deficit. There are plenty of articles written about that already. Instead, we will take a closer look at the $386 billion earmarked for energy and climate and how individual taxpayers could take advantage of some of the new tax incentives.
Energy Efficient Home Improvement Credit
The Energy Efficient Home Improvement Credit is similar to the old Nonbusiness Energy Property Credit that expired in 2021. Starting in 2023, homeowners can receive a tax credit of 30% for energy-efficient home improvements. Eligible improvements include energy-efficient doors and windows, air conditioners, circulating fans, and more. The lifetime limit for this tax credit increased from $500 to $1,200, meaning taxpayers can get more bang for their buck.