October 7, 2022

In addition to the reductions in U.S. emissions it will bring, there is much in the bill that could change both the way Americans power their homes and the types of vehicles they drive.

The bill contains a number of tax incentives aimed at pushing consumers, developers, small businesses and others toward clean energy and more efficient energy use — helping to lower the cost of purchasing electric vehicles, heat pumps, water heaters, solar panels in top floor and more.

These measures would be more comprehensive than existing weather programs, and many would be available to all households, not just low-income ones,” said Mark Wolfe, executive director of the National Energy Assistance Directors Association.

Tax credits work in another way to reduce costs: providing incentives for cheaper clean electricity powered by renewable energy sources.

“There are people who are really on the front lines of the inflation crisis and how expensive fossil fuels are because of Putin’s invasion of Ukraine, and this bill will provide big energy savings for those people,” Leah Stokes, senior policy adviser at Evergreen and associate professor of political science at the University of California, Santa Barbara, recently told reporters.

Here are the main parts of the bill that help consumers save money.

Savings on buying an electric vehicle: The bill extends the current $7,500 tax credit for a new vehicle, as well as a $4,000 tax credit for a used EV. It also gets rid of the current cap that reduces tax rebates to automakers after they’ve sold 200,000 EVs, and is written so that buyers can get an immediate rebate at the dealership, rather than waiting weeks or months for the tax rebate to go through.

But there’s an important caveat: Automakers and consumers likely won’t be able to take advantage of this tax credit for years to come. At the insistence of Democratic Sen. Joe Manchin, the tax credit was written in a way that would force automakers to move their EV supply chains out of China and into the US and countries with which the US has free trade agreements. Vehicles must be manufactured in North America, and EV batteries must also not come from countries like China.

As a result, U.S. automakers likely won’t be able to offer the credit in the coming years as they try to build their domestic supply chains, said Democratic Sen. Debbie Stabenow of Michigan.

The tax credit is also limited to trucks, vans and SUVs under $80,000 and other vehicles under $55,000 and has an income limit for consumers.

New tax credits will cover 30% of the cost of high efficiency air conditioners, water heaters, furnaces and other household cooling heating appliances.

Help install more efficient air conditioning and heating equipment: The bill would provide Americans with tax credits to cover 30% of the cost of installing high-efficiency ACs, water heaters, furnaces and other cooling and heating equipment.

Households will be able to receive up to $600 for each piece of equipment, up to a total of $1,200 per year. There will also be a special credit of up to $2,000 for electric heat pumps. And the credits could be used to upgrade breaker boxes, if needed, to handle additional electrical load.

This measure replaces a similar tax credit that expired at the end of last year and was capped at $500.

Help for low- and moderate-income Americans buy electrical appliances: The legislation requires that low- and moderate-income households be given rebates of up to $14,000 on the purchase of electrical appliances.

Rebates could cover half to all of the typical $14,000 cost of installing an electric heat pump, as well as much of the cost of electric water heaters, stoves and ovens and clothes dryers, as well as upgrading switches and electrical wiring of the House. The legislation provides $4.5 billion over 10 years for this provision.

To alleviate concerns that low-income households would have to pay for the items upfront, point-of-sale discounts could be provided or contractors could claim them, for example. It will depend on how the state energy agencies, which would administer the rebates, shape their programs.

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Discounts for home remodeling: Households could receive up to $4,000 in rebates to install energy-saving measures throughout their homes, according to the bill. Low- and moderate-income Americans could receive up to $8,000. The amount of the rebate will depend on the estimated savings achieved. The legislation would provide a total of $4.3 billion in funding over 10 years.

Tax credits to reduce energy leakage: Americans could get tax credits to cover 30 percent of the cost of home improvements that reduce energy leakage, such as updated windows, doors, insulation and other weatherization measures, according to the bill. They could receive a credit of up to $600 per improvement and a total of $1,200 per year. In addition, they could receive a $150 credit to conduct a home energy audit. The credit will be extended so families can use it multiple times to make upgrades over time.

HUD shell performance boost: The bill would provide $1 billion in affordable housing grants and loans administered by the Department of Housing and Urban Development to increase energy or water efficiency, improve indoor air quality, upgrade clean energy or electrification, or address of climate resilience needs. Improvements could include insulation, HVAC upgrades, flood proofing, storm proofing, water conservation changes and installing solar or other renewable energy systems

Appropriations in the bill would also cover 30% of the cost of a rooftop solar system and battery storage.

Tax credits for developers to build energy efficient homes: Builders could receive tax credits of $2,500 for single-family or manufactured homes and $500 for units in multifamily buildings for building Energy Star-certified homes. Developers could receive $2,500 for each multifamily unit if applicable wage requirements are met.

Credits will be doubled if the homes or units are also certified under the Department of Energy’s Zero Energy Homes program.

A credit of up to $2,000 to build energy-efficient homes expired at the end of last year.

Installation of solar panels in houses: Tax credits in the bill would cover 30% of the cost of purchasing a rooftop solar system and home battery storage. The average cost of a rooftop solar system is about $20,000, according the Solar Energy Industries Association. But that initial cost will result in energy bill savings every year and add value to a home.

For those who live in apartments or can’t install solar on their roofs, there are other ways to get solar power and lower energy bills, including leasing a rooftop solar system or joining a community solar farm to provide energy . Tax credits are increasing in the bill for solar projects and in low-income communities.

Small Business Incentives: Small businesses can receive tax credits of up to $1 per square foot of their business for making the space more energy efficient. They can get tax credits covering up to 30% of the cost of replacing fleets of cars and trucks with clean vehicles, as well as incentives to power their businesses with solar energy.

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