The Inflation Reduction Act passed by Congress took effect on January 1, 2023 to help millions of Americans save money in various ways. The new provisions contained in the legislation touch on a wide range of concerns, from reducing budget deficits to lowering health care and prescription drug costs to funding new energy and climate initiatives. According to the official score of the Congressional Budget Office (CBO), the legislation has $790 billion of offsets and nearly $485 billion of new spending and tax breaks.
 

Climate and Energy Provisions

According to the CBO report, the Inflation Reduction Act includes $386 billion of spending and tax breaks for climate and energy initiatives. These initiatives are designed to promote clean energy generation, environmental conservation, and retrofitting homes and buildings with green technology. Here are some of the most important climate and energy provisions.

A previously-owned clean vehicles credit worth 30 percent of a used electric vehicle's sales price, up to a $4,000 maximum. There is already an existing tax credit for the purchase of new clean vehicles.

An energy-efficient home improvement credit worth up to $1,200 in a year for homeowners that upgrade or retrofit their home to more efficiently regulate the temperature inside. The credit can be used for heating and cooling systems, insulation, and new doors, windows, and skylights. For heat pumps, the credit limit is higher at a limit of $2,000 in a year.

Residential clean energy credits are available for the installation of a geothermal heat pump, fuel cell energy systems, or residential solar or wind systems on a home. Each category is subject to specific eligibility criteria and maximum credit limits. When the credit is greater than the taxes owed that year, the excess amount may be carried over into the next year.
 

Health Care and Prescription Drug Provisions

Some of the most significant changes in the Inflation Reduction Act address health care and prescription drug costs. The CBO report shows that over the next decade, the federal deficit will be reduced by $237 billion by the prescription drug provisions in the legislation. Here are some of the most important health care and prescription drug provisions that may affect you.

Medicare will be able to negotiate the price of certain prescription drugs and the monthly cost sharing for insulin for people with Medicare is limited to $35.

The law effectively caps out-of-pocket prescription drug costs for Medicare Part D enrollees at approximately $3,250 for 2024. Beginning in 2025, the out-of-pocket spending cap drops to $2,000.

Adult vaccines recommended by the Advisory Committee on Immunization Practices (ACIP) and covered under Medicare Part D will be covered at no cost. Medicaid and the Children's Health Insurance Program (CHIP) are also required to cover all approved vaccines without cost sharing.

The Inflation Reduction Act allows Individuals with incomes up to 150% of the poverty line and resources at or below certain thresholds to receive full benefits under the Medicare Part D Low-Income Subsidy Program. Prior to this legislation, individuals with incomes between 135% and 150% of the poverty line received partial benefits.

The legislation extends the tax credits for Affordable Care Act (ACA) premiums through the end of 2024. They were scheduled to expire at the end of 2022.
 

Farm Aid Provisions

Some sections of the Inflation Reduction Act focus on helping farmers with funding and debt relief.

Section 22006 of the legislation earmarks $3.1 billion for debt relief specifically incurred by using certain Farm Service Agency (FSA) direct and guaranteed loans. The USDA has been charged with providing this relief for distressed borrowers.

Section 22007 is designed to provide financial assistance to farmers that had difficulty accessing USDA's farm lending programs in the past. $2.2 billion has been allocated for this initiative and the USDA has announced that those payments will be made towards the end of this year.

These are just some of the provisions in the Inflation Reduction Act designed to help families across the nation. The legislation also has provisions designed to help small businesses thrive and allocates a significant sum for ensuring taxpayers are adhering to the tax code. Overall, the legislation is expected to help millions of people improve their financial health by making it easier for them to take care of their physical health and improve their homes.