Climate watch: Take advantage of tax breaks in the Inflation Reduction Act

Recently, I told a friend that he could get a 30% tax credit on the cost of a mini-split heat pump that he installed this year in a rural cabin he owned. The mini-split cost $800. So, the tax credit will amount to $240 right off his federal income tax bill.

My friend was delighted to hear this. “It was part of a law passed two years ago,” I said. “Do you know anything about it?”

“No,” was his reply. “Never heard of it.”

The law is the Inflation Reduction Act. The second anniversary of its passage was marked, or more accurately ignored, on Aug. 13. This law is a signature accomplishment of the Biden Administration.

The most sweeping climate legislation in the nation’s history, the Inflation Reduction Act provides generous tax incentives — and in some cases upfront discounts — for the purchase of many things electric including vehicles, some appliances, rooftop solar installation, home wiring upgrades and other things. These are available to American homeowners and renters over the next 10 years.

Chances are you haven’t heard about this either. News coverage of the actual workings of government is abysmal. The second anniversary of the Act’s passage was only perfunctorily noted in the press. I did find a story on Fast Company, a business magazine. It was a report on a speech that John Podesta, senior advisor to the president for international climate policy, made on the Act’s second birthday.

“Podesta said in a speech in Washington, DC, that he was confident that the law, which provides billions of dollars in tax credits to help consumers buy electric vehicles and companies produce renewable energy, could continue to succeed if Republicans take control of the White House and Congress in the November elections,” the article stated.

No Republicans voted for the Act and House Republicans have tried 42 times to repeal parts or all of it, so why is Podesta confident that the IRA has staying power?

Because 58% of new jobs created due to investments from the law are in districts and states led by Republicans. In its first year, 170,000 jobs were created, according to WhiteHouse.gov and 1.5 million new jobs are projected over the next decade.

“Podesta mentioned several states, such as Oklahoma and South Carolina, where Republican politicians have publicly celebrated in-state investments that emerged as a result of IRA tax incentives. He referred to a letter by House Republicans who have urged party leadership to protect IRA provisions.”

While they may not be able to name the law that made it possible, many resourceful Americans have nonetheless discovered the benefits it brings. The Treasury Department reports that 3.4 million U.S. households have claimed $8.4 billion in tax credits and discounts to offset the costs of electrification and energy improvements.

If you have bought a new or used electric vehicle this year, make sure you take advantage of tax credits for that. If you have done some basic weatherization, upgraded your electric panel, installed a heat pump, bought an electric vehicle charger, or put solar panels on your roof, take those receipts to your accountant or tax preparer. You will get substantial dollar-for-dollar tax credits.

And that list of benefits is far from complete. For more information check out RewiringAmerica.org’s IRA Savings Calculator at homes.rewiringamerica.org/calculator.