In case you missed it, the price of most things we consume has increased considerably over the past year. From September 2021 to September 2022, inflation was up 8.2%; the good news is this was lower than August’s year-over-year inflation of 8.3%. November’s inflation print came in at 7.1% lower than the expectation of 7.3% and heading lower. Recently congress passed the inflation reduction act. In the short term, we have a supply-side issue where demand exceeds supply. A flaw of the Bill is that I don’t see how it will alleviate any short-term inflation as it encourages more demand for already short supply. What it will do, is help reduce long-term inflation.
Over the past few weeks, I have spent some time reviewing the direct consumer benefits. BEFORE YOU MAKE ANY BIG PURCHASES THIS YEAR, READ THIS POST! Starting this year, the benefits for consumers will kick in for eco-friendly purchases. I had to read numerous articles and review the Bill directly to get the information. So I am listing the direct benefits below to show you where you can save money.
Here are the items that are in the Bill:
- Electric Vehicles
- Home Energy Audits
- Exterior Doors that meet energy star requirements
- Exterior Windows and Skylights that meet energy star certifications
- Central Air Conditioners, Heat Pumps, How Water Heaters, Furnaces and Water Boilers that are energy efficient
- Heat Pump and Heat Pump Water Heaters
- Biomass stoves and Boilers
- Solar Panels or other equipment to harness renewable energy such as wind, geothermal or biomass fuel.
- Electric panel or wiring upgrades for home charging stations or solar panels
- Home insulation
- Gas to electric appliances
So those are the high-level savings. Here are some additional details and thoughts on the Bill. There are a lot of income limits in the Bill, so if you qualify for one part of the Bill, you might not in another section so read carefully.
For the electric car purchase, there are some catches; new Sedans need to be under $55,000, and new SUV’s and Sedans need to be under $80,000. A qualified buyer has an adjusted gross income cap below $150,000 for a single tax filer, $225,000 head of household, and $300,000 for married filing jointly. For a list of eligible vehicles assembled in North America, click here https://tinyurl.com/mv2xwwav. For more details on the tax credit, click here https://tinyurl.com/2er9uy37. In 2024, the tax credit will turn into a point-of-sale discount on the car.
Some thoughts. As you have seen over the last year, when energy costs are low and inflation is low, people don’t think as much about these cost-reducing items. Insulating your attic can save anywhere from 10% to 40% of your heating and cooling costs. If your air conditioner is on its way out, planning to upgrade to a high SEER air conditioner or heat pump could be beneficial.
A word to the wise, I would recommend getting a few people’s quotes and opinions. The opinions are more important than the quotes. Most of the jobs mentioned in this Bill are not ideal for the lowest quote professional. For instance, if you want to install a high energy-efficient heat pump, two professionals can say they will install the same unit and put in ductwork. However, if the ductwork is not well thought out for the layout of the home and the system going in, you might not get what you paid for. A heat pump both heats and cools your home, hot air rises, and cool air falls. You need to have ducts up high and down low for supplies and returns. If you install the ducts all toward the ceiling, you’ll have a nice cool house in the summer, but in the winter, the upstairs might be 80 degrees while your downstairs is 60 degrees. If you need multiple zones, do you control it with a damper motor or two smaller ton units? Find knowledgeable professionals with good reviews and make logical sense with the installation.
There are additional benefits in the Bill that we won’t be covering in this post such as medicare and prescription drug cost controls. We wanted to give you the knowledge to plan out home projects and get the best savings. For additional questions, feel free to reach out to us or check with your CPA.