This story was originally Appearing on Grist is part of the climate desk collaboration.
“A large bill” signed by President Donald Trump on July 4 will upend many aspects of American life, including climate policy. Republican-backed laws not only derail the U.S. efforts to reduce greenhouse gas emissions, but could also hit consumers’ pocket books.
From a climate perspective, the most important rollback of the legislation is aimed at industries such as renewable energy, not individuals. But taxpayers who want to decarbonize their homes will have a very real impact.
The Inflation Reduction Act of 2022 (IRA) provides tax credits for climate-friendly purchases, from heat pumps to solar arrays in 2032.
“The bill will receive a lot of assistance from consumers,” said Lowell Ungar, director of federal policy at the nonprofit U.S. Energy Conservation Economic Commission. He noted that two million people used the home renovation tax credit in the first year alone.
The good news is that the law will not affect the billions of dollars the IRA has sent to the state’s efficiency and electrification discount program, and the majority of that money will be available outside of federal sunset. But, Ungar added, the tax credit can still save thousands of dollars, and then they disappear.
“If consumers can invest now, that will help them,” he said.
For those who want to act, this is a review of when it will disappear.
Buy an electric car by October
New electric vehicles that meet federal domestic manufacturing requirements are eligible for tax credits up to $7,500. While not directly providing consumers with credit for foreign-made electric vehicles, automakers do get loans and often through leasing through savings. Used electric vehicles purchased at dealers under $25,000 are also eligible for a $4,000 credit.
All of this disappeared on September 30. There will be no honor after that. Ultimately, this will make new electric cars more expensive and make middle-income Americans’ technology even more out of reach.
Income caps on electric vehicle credit still apply, limiting the income of new electric vehicles to second-hand vehicles in households earning less than $300,000. The new car also has a retail price limit of $80,000.
Strangely, the tax credit for installing an EV charger (up to $1,000) will run next June.
Home improvements before the end of the year
Huge energy-efficient home renovation credits can provide up to $2,000 for qualified heat pumps, water heaters, biomass furnaces or biomass boilers. It also offers $1,200 for efficiency upgrades such as insulation, doors, windows and even home energy audits.
These will disappear on December 31. You must “include all items in use” at the time to remind you: Tax credit reduces your tax liability, but do not use discounts. You have to have a tax bill to benefit, which may not be the case for some low-income families.
Pay for solar energy this year
The most valuable IRA incentive is residential clean energy credit. It covers 30% of clean energy systems such as solar panels, wind turbines and geothermal pumps, and has no covers. Due to the average cost of solar systems north of $28,000 north of the U.S., this means the value of the tax credit is about $8,500. Credit disappeared by the end of the year, although the law refers to the “expenditure” made at the time, so it could mean paying (but not necessarily installing) until then.
Like other credits, Ungar recommends confirming any changes to tax professionals. He also said the potential of higher tariffs is another reason to move quickly. But, he said, even if the credits disappear, many of these improvements may still be financially significant in the long run.
“These improvements will lead to energy savings that lower energy bills, regardless of tax credits,” he said. “In some cases, improvements will be effortless in any case.”
