What does the "historic" inflation reduction law mean for your bank account?

What does the "historic" inflation reduction law mean for your bank account

Senate Democrats passed a comprehensive climate, health care, and tax bill on Sunday. 

The package is known as the 2022 Inflation Reduction Act or IRA. It allocates hundreds of billions of dollars to expanding access to health care, lowering prescription drug costs, and minimizing the effects of climate change. To finance this, it raises taxes on profitable large corporations and aims to impose better tax collection efforts on the rich. Democrats say she is sticking to President Joe Biden's pledge not to raise taxes on families with incomes less than $400,000 yearly or trim businesses.

All Republican senators voted against the bill, saying it would eliminate jobs and raise prices. Economists say the bill will likely lower inflationary prices, although it may only be moderately. They also say that consumers probably won't feel the effects immediately; Rather, the bill makes long-term investments.

The IRA is a shortened version of the "Build Back Better" agenda, Biden's original domestic policy plan that was put on hold by Republicans and moderate Democratic Senator Joe Manchin of West Virginia. Although the IRA includes funding for climate change initiatives and the expansion of health insurance, some of Biden's stated policy priorities — including expanding childcare, universal preschool, and paid family leave — have disappeared to make them more palatable to Manchin.

Negotiating prescription drug prices

The current version of the IRA allows Medicare to negotiate some prescription drug prices for seniors. Up to 10 of the most expensive drugs will be arranged by 2026 and expand to 20 by 2029.

It also limits the out-of-pocket medical costs for Medicare Part D patients to $2,000 per year beginning in 2025 and includes the option to split payments into monthly installments.

The bill would also have capped insulin costs at $35 a month for privately insured Americans, but Senate Republicans and a US Senator blocked the measure. This cap now applies only to those with Medicare Part D. The bill also expands cost-sharing assistance to low-income and disabled people through Medicare.

Health benefits under the Affordable Care Act

Federal subsidies for some Affordable Care Act (ACA) health plans that are about to expire are extended through 2025 under the IRA.

The support helps an estimated 13 million people afford health insurance, saving the average recipient hundreds of dollars a month.

Support clean energy

Although some of Biden's original environmental plan has been shelved to get Mansion on board, the IRA also includes a $4,000 tax credit for those who earn up to $75,000 (or $150,000 jointly) to purchase a used electric vehicle and up to $7,500 for those who earn up to $150,000 (or $300,000 combined) to buy certain new electric cars made in North America.

Credit will be given at the point of sale, so consumers won't have to wait until they file their taxes to receive it. 

The IRA also expands the Energy Efficient Home Improvement Credit, or 25C, allowing families to deduct up to 30% of the cost of qualifying green upgrades for their homes from their tax bill, up to a maximum of $1,200 per year for the next ten years. One exception: Taxpayers can deduct up to $2,000 for a heat pump water heater. Currently, there is a $500 lifetime limit for this credit.

In addition, it applies consumer home energy discounts for low-income families. This includes rebates of up to $8,000 for eligible families who install heat pumps that can heat fabulous homes, $1,750 for a water heater heat pump, and up to $840 for an electric stove, among others.

These taxpayers will save not only on installation but on their energy bills in the long run; the team wrote at Rewiring America, an electric nonprofit that promotes energy efficiency. Increasing energy efficiency in homes will also reduce carbon emissions.

The bill also includes tax breaks for manufacturers of solar panels and wind turbines and money to build factories that manufacture clean energy technology, among other provisions that care about the environment.

The Rhodium Group, a research organization, estimates that the law's provisions will save families $730 to $1,135 a year by 2030 on energy costs.