The Inflation Reduction Act: What Does It Mean for You?

As you probably heard on the news, President Biden signed the Inflation Reduction Act of 2022 on August 16. Among other things, the legislation includes various initiatives such as locking in the American Rescue Plan health coverage rates through 2025, increasing taxes for large corporations, incentives for clean energy use, and significant investments in making health care and prescription drugs more affordable.

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Inflation Reduction? That Remains to Be Seen.

The bill’s name would imply it seeks to tame runaway inflation. Unfortunately, the Congressional Budget Office (CBO) and the Penn Wharton Budget Model (a nonpartisan research organization) anticipate that the bill won’t significantly reduce inflation. However, the CBO went on to say that the bill will likely decrease the deficit by more than $100 billion over the coming decade. And reducing the deficit is always a good thing!

Positive Impact on Healthcare and Drug Costs.
For consumers, the bill will result in significant savings on prescription drugs for millions of retirees. The goal is to revolutionize the prescription drug market and put more pressure on drug companies to hold them accountable for pricing. Starting in 2025, Medicare recipients will have a $2,000 annual cap on out-of-pocket prescription drug costs (a significant decrease from the $7,050 out-of-pocket prescription max under today’s Medicare plan). For an in-depth look at how this new legislation might impact retirees’ healthcare expenses, read this brief from HealthView Services.

Another positive impact for approximately 3 million Americans is the Affordable Care Act subsidy extension. These subsidies (currently paid by the federal government to lower premiums) were scheduled to expire at the end of this year; they will now be extended through 2025.

A Healthier Planet.
Most of us would agree that we could all do a better job caring for our planet. The Inflation Reduction Act includes significant legislation related to energy security and climate change that should get the ball rolling. It also provides folks with economic incentives for making more planet-centric choices.

If you’re considering any energy-related home improvements, the bill includes a 30% tax credit for using energy-efficient windows and heat pumps, and rebates for upgrading to energy-efficient appliances. Solar panel installation will provide additional tax credits.

For those owning an electric vehicle, there are new and expanded tax credits for electric vehicle owners. There’s also a tax credit for installing an electric charger in your home (although there are restrictions, so be sure to read the fine print).

While the bill may not result in you seeing an immediate decrease on your weekly grocery receipt, it’s monumental in other ways. And, for many, future healthcare cost reductions will be a welcome change.

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