The Inflation Reduction Act of 2022 (IRA for short) would be more aptly named the Climate Change Mitigation Act. At $369 billion, it is easily the biggest investment in US history aimed at slowing climate change. A significant amount of this total will be directed at fostering development of new technologies and US capacity to manufacture devices and equipment such as solar panels and lithium-ion batteries that will be needed in increasing amounts to combat climate change.

But it also includes a host of tax incentives and rebates that will allow all of us to more easily transition to a sustainable energy future. Modeling by the Rhodium Group highlights the substantial emissions reduction impact of these provisions. Without the IRA, the United States was on track to reduce greenhouse gas (GHG) emissions by between 24% to 35% by 2030 compared to 2005 levels. Under the IRA, this would increase to between 31% to 44% by 2030 with an increased likelihood of ending at the higher end of the scale.

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Peruse an overview of tax implications from the IRS:

Download the IRA Guidebook

Home energy incentives for individual consumers

There are a number of provisions in the IRA that can be utilized by individuals to invest in clean energy products such as solar panels, EVs, and sustainable appliances for the home.

  • Extends credits through 2034 for residential solar, wind, geothermal, biomass fuel. Includes home energy storage batteries in credit eligibility. This includes: a 30% credit for projects started between 2022 and 2032, a credit of 26% for projects started in 2033 and a credit of 22% for projects started in 2034.
  • Increases the credit for energy efficient home improvements such as added insulation, from 10% to 30%, and extends them through 2032.
  • Expands the credit to cover the cost of home energy audits up to $150 and electrical panel upgrades up to $600.
  • For residents that fall below 150 percent of an area’s median income, establishes a rebate program of up to $14,000 per household including $8,000 for heat pumps, $1,750 for heat pump water heaters, and $840 for electric stoves. Also includes rebates for improvements to electrical panels or wiring and home insulation or sealant.

Incentives for appliances renters can take with them

Many of the new home energy provisions are applicable to renters as well as homeowners. This link presents the story of a low income retired couple who were able to obtain a countertop electric oven, countertop induction “hotplate” that they can take with them if they move, completely paid for, and, finally, plans for additional items such as window heat pump/air conditioners that should be available in a couple of years.

Clean vehicle incentives for individual consumers

The IRA also maintains the existing $7,500 tax credit for the purchase of a qualified new clean vehicle, including electric vehicles, plug-in hybrids, and hydrogen fuel cell vehicles, making it possible for manufacturers such as Tesla and GM that had been phased out under the old program to participate again.

However, the credit is reduced or eliminated if a certain percentage of the critical minerals utilized in battery components are not extracted or processed in the U.S. or a Free Trade Agreement country or recycled in North America. The percentage required increases from 40% in 2024 to 80% in 2026. The credit is reduced or eliminated if an EV is not assembled in North America or if the majority of battery components are sourced outside of North America. The percentage increases from 50% in 2024 to 100% in 2028.

The new provision also implements a price cap of $80,000 per vehicle for vans, SUVs, and pickups, and $55,000 for other vehicles. And, it implements an income eligibility limit of $150,000 or $300,000 for joint filers. (Note that the Treasury Dept. has delayed issuing guidelines on the battery component provisions until March. Therefore, some cars that may presumably not be eligible after that, may qualify for a credit up until that time.)

The State of California provides a separate rebate of $4500 for a hydrogen fuel cell vehicle, $2,000 for a battery EV, $1,000 for a plug-in hybrid and $750 for a zero-emission motorcycle, limited to sedans with an MSRP of $45,000 or less and trucks and vans with an MSRP of $60,000 or less and provided the applicant’s income does not exceed $135,000 for single filers, $175,000 for head-of-household filers or $200,000 for joint filers.

New tax credit for purchase of previously owned clean vehicles

The IRA creates a new consumer tax credit for the purchase of previously owned clean non-commercial vehicles, including electric vehicles and plug-in hybrids. The credit is equal to the lesser of $4,000 or 30% of the vehicle cost. Sets a maximum sale price of $25,000 and establishes an income limit of $75,000 for individual and $150,000 for joint filers. The model purchased must be at least 2 years older than the year of sale.

IRA Savings Calculators

Case Study for Renters and What They Can Take With Them


Incentives for industry and development

The big picture incentives for industry and development are worth a quick look for interest and background. The IRA:

  • Creates a new 10-year incentive for clean hydrogen production.
  • Creates a tax credit for the production of clean energy technology components that are produced in the United States or by a U.S. possession.
  • Provides a nuclear power production credit through 2032.
  • Establishes a tech-neutral tax credit for construction of electricity technologies through the later of 2032 or when emission targets are achieved (i.e., the electric power sector emits 75% less carbon than 2022 levels).
  • Establishes a new “source neutral” tax credit for applicable renewable energy production beginning 2024, after the current credit expires. This includes geothermal, wind, closed- and open-loop biomass, landfill gas, municipal solid waste, hydropower, and marine and hydrokinetic facilities (wave and tidal powered) through the later of 2032 or when emission targets are achieved (i.e., the electric power sector emits 75% less carbon than 2022 levels).
  • Extends the 30% investment tax credit to clean energy projects to strengthen domestic energy manufacturing and support the production and recycling of clean energy products. It also expands credit to include projects at manufacturing facilities that want to reduce their GHG emissions by at least 20%.
  • Creates a new technology neutral 2-year tax credit for low-carbon transportation fuel.
  • Creates an incentive to lower aviation transportation emissions.
  • Creates a new tax credit for the purchase of clean commercial vehicles up to $40,000 for larger trucks.
  • Enhances and extends the tax credit for direct carbon capture.
  • Creates a new $5.8 billion program under the Office of Clean Energy Demonstration (OCED) to invest in projects aimed at reducing emissions from energy intensive industries including iron, steel, concrete, glass, pulp, paper, ceramics, and chemical production.
  • Establishes several programs to further environmental and energy justice among low income and marginalized communities. Including but not limited to: $2.8 billion to the EPA for grants and $200 million for technical assistance to projects related to climate change and air pollution, $3 billion, with $1.1 billion set aside for disadvantaged communities, to the Fair Housing Administration for grants to improve transportation access and mitigate negative safety or environmental impacts in underserved communities, 86 million to the EPA for partnerships within low-income and disadvantaged communities related to GHG emissions reductions and creates a 40% investment tax credit for solar or wind projects located in a low-income community or on Tribal land and 20% for facilities that are part of a low-income residential housing or low-income economic benefit project.