The Democrats’ new partisan tax and clean energy bill is a big deal for climate and energy savings. With nearly $370 billion in energy programs and tax incentives, it is the largest climate investment in U.S. history.
In addition to the U.S. emissions reductions these will bring, there is a lot in the bill that could change the way Americans power their homes and the types of vehicles they drive.
The bill contains a series of tax incentives designed to drive consumers, developers, small businesses and others to clean energy and more efficient energy use — helping reduce the cost of buying electric vehicles, heat pumps, water heaters, rooftop solar panels and more cost.
These measures will be more comprehensive than existing weather protection programs, and some of them will apply to all households, not just low-income households,” said Mark Wolf, executive director of the National Association of Energy Assistance Directors.
Clean Power Nonprofit Rewires America latest estimate If an American home installed electric heat pumps to heat water, heat and cool air, replace gasoline cars with electric cars, and install solar power, they would save $1,800 a year.
Tax credits reduce costs in another way: incentivizing cheaper, clean electricity powered by renewable energy.
“There are people who are really on the front lines of the inflation crisis and how expensive fossil fuels have become because of Putin’s invasion of Ukraine, and this bill will save a lot of energy for those people,” Leah Stokes, senior policy advisor at the University of California, Santa Barbara Evergreen, an associate professor of political science at the campus, told reporters recently.
Here are the main bills to help consumers save money.
Savings on buying an electric vehicle: The bill expands the current $7,500 tax credit for new cars and a $4,000 tax credit for used electric vehicles. It also removed the current cap on automakers cutting tax credits after 200,000 EVs were sold, and it was written so buyers could get the discount right at the dealership, rather than waiting weeks or months for it Get tax credits.
There’s an important caveat, though: Automakers and consumers may not be able to take advantage of this tax credit for years to come. At the insistence of Democratic Senator Joe Manchin, the tax credit was written in such a way that automakers were forced to shift their electric vehicle supply chains from China to the United States and countries with free trade agreements with the United States. Vehicles must be built in North America, and EV batteries cannot come from countries such as China.
As a result, Sen. Debbie Stabenow, Democrat of Michigan, said U.S. automakers may not be able to provide credit for years to come as they try to build their own domestic supply chains.
The tax credit is also limited to trucks, vans and SUVs under $80,000, and other vehicles under $55,000, and there are income thresholds for consumers.
Help install more efficient air conditioning and heating equipment: The bill would provide Americans with a tax credit to cover 30 percent of the cost of installing high-efficiency air conditioners, water heaters, furnaces and other cooling and heating equipment.
Homes can receive up to $600 per device and up to $1,200 per year. Electric heat pumps will also receive special savings of up to $2,000. Credits can be used to upgrade breaker boxes to handle additional electrical loads, if needed.
The measure replaces a similar tax credit that expired late last year and was capped at $500 for life.
To help low- and middle-income Americans buy appliances: The legislation calls for up to $14,000 in rebates for the purchase of appliances for low- and moderate-income households.
Rebates may cover half to all of the typical $14,000 cost of installing an electric heat pump, as well as most of the cost of an electric water heater, stove, oven and clothes dryer, as well as the cost of upgrading your home’s breaker box and wiring. The legislation sets aside $4.5 billion over 10 years for this provision.
For example, to allay concerns that low-income households have to pay for these items up front, rebates could be offered at the point of sale, or contractors could claim them. It will depend on how the state energy office, which administers the rebate, develops their plan.
Rebates for remodeling your home: Under the act, households can receive rebates of up to $4,000 for installing energy-saving measures in their homes. Low- and middle-income Americans can receive up to $8,000. The amount of the rebate will depend on the estimated savings that will be realized. The legislation would provide a total of $4.3 billion in funding over 10 years.
Tax credits to reduce energy leakage: Under the bill, Americans could receive a tax credit to cover 30 percent of the cost of home improvements that reduce energy leakage, such as updating windows, doors, insulation and other weatherproofing measures. They can get up to $600 in credits per improvement, for a total of $1,200 per year. Additionally, they can get a $150 credit to conduct a home energy audit. The line of credit will expand so families can use it multiple times to upgrade over time.
Improve the efficiency of the HUD enclosure: The bill would provide $1 billion in grants and loans to affordable housing administered by the Department of Housing and Urban Development to improve energy or water efficiency, improve indoor air quality, make clean energy or electrification upgrades or address climate resilience needs.These improvements may include insulation, HVAC upgrades, flood protection, storm resistance, water conservation changes, and the installation of solar or other renewable energy systems
Tax credits for developers building energy efficient homes: Builders can receive a $2,500 tax credit for single-family or manufactured homes, and a $500 tax credit for multifamily building units used to build Energy Star-certified housing. Developers can receive $2,500 per multifamily unit if prevailing wage requirements are met.
Points are doubled if the home or unit is also certified under the Department of Energy’s Zero Energy Ready Home Program.
Credits of up to $2,000 for building energy-efficient homes expired late last year.
Install solar panels at home: The tax credit 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 to Solar Energy Industry Association. But this upfront cost will result in annual savings in energy bills and added value to the home.
For those who live in apartments or can’t have solar on their roofs, there are other ways to get solar and lower energy bills, including renting a rooftop solar system or joining a community solar farm for electricity. Tax credits on the bill also increase solar projects in low-income communities.
Small Business Incentives: Small businesses can receive up to $1 per square foot of business to improve the energy efficiency of their space. They can receive tax credits of up to 30% on the cost of replacing their car and truck fleets with cleaner vehicles, as well as incentives to power their businesses with solar energy.