The Inflation Reduction Act Will Likely Save You Money

Daniella Cressman

Disclaimer: This information is accurate and true to the best of my knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Recently, the Inflation Reduction Act has been passed and, while most financial experts have said that they do not believe it will actually reduce inflation, it could save everyday Americans a lot of money.

“'The American people are going to see lower prescription drug prices, lower health care costs and lower energy costs,' Biden said in a speech Friday after Congress passed the Inflation Reduction Act." —Adam Hardy

1. SUBSIDIZED HEALTH INSURANCE

"The act subsidizes premiums for people who receive health care coverage under the Affordable Care Act (aka Obamacare) and fall within 400% of the federal poverty line. This subsidy is already in place via pandemic-era policy but was slated to expire at the end of the year. The legislation extends the subsidies to 2025 and is expected to cost the government about $64 billion." —Adam Hardy

2. CHEAPER PRESCRIPTION DRUGS

Pharmaceuticals are—too often—much more expensive than they ought to be.

The Inflation Reduction Act will make these medications more affordable for those who have Medicare.

"The Inflation Reduction Act makes some big changes to Medicare, the federal health insurance program that covers more than 60 million Americans, primarily folks 65 and older...Chief among those changes: Out-of-pocket drug costs for some 50 million Medicare Part D beneficiaries will be capped at $2,000 per year. This brand-new provision won’t kick in until 2025. Once in effect, those with Medicare coverage will also be able to break down out-of-pocket drug costs into monthly payments, which Biden has highlighted as 'a godsend for many families.' A new cap on insulin costs is taking effect even sooner. Starting in 2023, out-of-pocket insulin costs are capped at $35 per month for Medicare beneficiaries — a move the White House expects to benefit 3.3 million Americans." —Adam Hardy

Broader changes are also on the horizon for the pharmaceutical industry.

"Broader changes are coming for the pharmaceutical industry, as well. A key provision of the Inflation Reduction Act will allow Medicare to negotiate prescription drug prices directly with drug makers, a provision long sought after by many Democrats and advocates who want to rein in drug prices. Under the new legislation, the federal government will begin identifying 100 of the most expensive Medicare drugs. Of them, it will choose 10 drugs to begin negotiations in 2023, and the new negotiated prices will go into effect in 2026. By 2028, an additional 10 drugs will be chosen and negotiated. The act also implements an 'inflation rebate' rule that penalizes drug makers for hiking the price of certain drugs higher than the rate of inflation." —Adam Hardy

3. TAX CREDITS FOR ELECTRIC VEHICLES

Tax credits are accessible for many EV buyers. That being said, there are quite a few limitations.

The act expands a tax credit of up to $7,500 for certain new electric vehicles and introduces a credit of up to $4,000 for used EVs.

"Both tax credits have earnings caps. Only people who earn $150,000 or less as a single filer can qualify for the new EV tax credit. (Married couples that file jointly and earn up to $300,000 are eligible.) For the used EV credit, the income limit is lower: $75,000 for single filers and $150,000 for married couples. In addition to the income caps, the tax credits apply only to EVs selling below a certain price. For new electric vans, trucks and SUVs, the sticker price can’t exceed $80,000. The price for new electric cars can’t exceed $55,000. On the other hand, to be eligible for the used EV credit, the vehicle can’t cost more than $25,000, and it must be at least 2 years old. EVs purchased in 2023 are eligible for the credits. Starting in 2024, the credits can be applied as a discount directly at the dealership." —Adam Hardy

4. INCENTIVES FOR ENERGY-EFFICIENT HOME UPGRADES

These are meant to encourage environmentally sustainable choices for homeowners and aid in the fight against climate change.

"Many incentives for folks who make energy-efficient home upgrades are tucked inside the Inflation Reduction Act. According to the White House, the act provides '$14,000 in direct consumer rebates for families to buy heat pumps or other energy efficient home appliances, saving families at least $350 per year.' Additionally, homeowners can get a tax credit of up to 30% for the costs of installing solar, wind and other renewable energy systems between 2022 and 2032. A similar 30% tax credit — up to a max of $2,000 — can help defray the expenses of certain energy-efficiency projects like upgraded windows and doors as well as natural-gas water heaters. Other climate-related proposals are aimed at incentivizing American companies and manufacturers to transition to green energy sources and curb emissions — while increasing domestic energy production. The logic follows that these changes would reduce the U.S.'s reliance on fossil fuels and lower the cost of energy in the long run. Cumulatively, Democrats say the climate-related provisions will curb carbon emissions by roughly 40% by 2030." —Adam Hardy

So there you have it: while the Inflation Reduction Act won't meaningfully affect inflation, it will likely have an enormous impact on the environment and save consumers an enormous amount of money.

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Canadian-American author writing about local politics, personal finance, & dining in Albuquerque.

Albuquerque, NM
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