How does the IRA affect you?

The Inflation Reduction Act, a big bill signed into law this month, is broader than its name may imply. With tax credits and other provisions for climate change mitigation, healthcare, firefighting and more, this 730-page bill covers a fairly broad range of items potentially impacting American life both long-term and short-term.

As with most things these days, there’s already a rash of misinformation out there, claiming it does more, less, or different than what’s actually in the text of the new law.

Some of what is there is drawing ire, such as the big investment in the enforcement arm of the IRS, in part to step up collection efforts and audits of those earning $400,000 or more. It also sets a 15% alternative minimum tax for large corporations earning more than $1 billion. Contrary to rumor, there is no change in individual tax rates.

Some earlier provisions didn’t pass Congress: Expanded Medicaid for people who struggle to afford health care, paid family leave similar to other nations, nor higher tax credits for households with children.

However, the law does include some potential savings for consumers and seniors, such as:

Drug costs

For the first time in 19 years Medicare is allowed to negotiate - similar to other insurers - with pharmaceutical companies for lower drug prices. People with Medicare Part D will have their annual costs capped at $2,000, and insulin at $35 monthly. These will take more than a year to implement, but they should lower prescription drug costs for seniors.

Climate tax credits and rebates

Consumers may be eligible for up to $10,000 in tax breaks for energy-efficient home and vehicle purchases, such as:

Electric cars: A $7,500 tax credit for a new electric vehicle (if taxable income doesn’t exceed $150,000, or $300,000 for joint filers). The new vehicle’s price must not exceed $55,000 or $80,000 depending on the type. For used electric vehicles, the rebate is $4,000.

Solar and wind: In addition to lower energy bills, homeowners may qualify for a rebate of up to 30% for solar panels or other residential clean energy installations, such as wind, biomass, or geothermal heat pumps. The law also includes a new credit for batteries which store renewable energy.

Windows, skylights, and water heaters: Tax credit of up to 30% (limit of $2,000) for installing energy-efficient windows, skylights, exterior doors, water heaters, etc. The old credit only reimbursed up to 10% and $500. One way to check if the item qualifies is to look for an Energy Star label.

Other energy rebates: Two other programs, one for which states can apply and another for individual consumers, give up to 50% cash back in the form of grants for reduction of energy usage, with older means such as insulation or HVAC upgrades. High incomes get a lower percentage rebate. How rebates from the state grants would work is up to each state.

ACA subsidies cap

Health insurance premiums have been going up along with rapidly rising health care prices. However, the new law guarantees that people insured through the Affordable Care Act won’t see an effective rise in premium rates for the next three years, as their income-based subsidies which were set to expire have been extended.

You can read the final version of the act which was signed into law at congress.gov/bill/117th-congress/house-bill/5376/text.

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Sholeh Patrick, J.D. is a columnist for the Hagadone News Network. Email sholeh@cdapress.com.