Stimulus Update: 4 Ways the Inflation Reduction Act Will Put Money in Your Pocket

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The Inflation Reduction Act is likely to benefit all Americans.

As the government works to curb inflation, you may find yourself benefiting financially. On Tuesday, President Joe Biden signed into law the Inflation Reduction Act. Here are four ways you're likely to spend less and save more of your hard-earned money thanks to the new law.

1. Cheaper prescription medications for Medicare recipients

It won't happen immediately, but the new legislation addresses the sky-high cost of prescription medications by allowing Medicare to negotiate prices with pharmaceutical companies. Slowly, beginning with 10 prescription drugs, prices will drop.

Today, the price of a vial of insulin ranges from $175 to $300, and the average diabetic uses two vials a month. In great news for Medicare recipients with diabetes, the cost of insulin will max out at $35 a month. According to the Centers for Medicare and Medicaid Services, capping the price of insulin will benefit 3.3 million Americans.

One of the most exciting things about the new law is that it caps the out-of-pocket medical costs a Medicare recipient must pay to $2,000 a year beginning in 2025. To put the value of this savings into perspective, the average out-of-pocket limit for Medicare Advantage enrollees in 2021 was $5,091 for in-network medical care. It was $9,208 for in-network and out-of-network care combined.

2. Quicker refunds at tax time

If you find yourself in need of that tax refund each spring, this will come as good news to you. $80 billion in additional funding to the IRS over the next decade means we'll all see those refunds in less time. Plus, the law includes a program allowing Americans to file their tax returns directly with the IRS free of charge. It's estimated that the change will save taxpayers $30 billion in tax-filing fees each year and an estimated 2 billion hours. That doesn't even take into account how much American who invest the savings are likely to benefit.

3. Tax credits for switching to electric vehicles

Part of the Inflation Reduction Act is designed to get the U.S. on par with other countries as the world seeks to fight global warming. While there are some who deny melting ice sheets, dying coral reefs, and lost forests releasing vast amounts of greenhouse gasses into the atmosphere, science is impartial, and global warming is a real threat to humanity. According to scientists, the world is "perilously close" to irreversible climate change.

As the U.S. joins hundreds of other countries in the fight against global warming, some efforts may seem small but are necessary. For example, the new law will give people who buy new electric vehicles a $7,500 tax credit next year. Further, anyone who buys a used electric car will receive a credit of $4,000.

Not only is moving away from gas-guzzling cars one way to put a lid on greenhouse gasses, but it also means money coming back to you if you decide to go electric.

If you live in an area of the country that's not set up for electric vehicles, give it a little time. In the not too distant future, you're sure to see charging stations around town. In other words, if this tax rebate doesn't impact you next year, it just might over the next few years.

4. Energy cost savings

Slowing global warming is all about finding more clean and sustainable energy sources. The bill signed by the president includes $80 billion in rebates, including up to $14,000 in cash back when you make green-energy upgrades to your home.

Let's say your furnace takes its final bow, or you simply decide to upgrade to a more Earth-friendly heating system. Installing a heat pump will score a tax credit of 30% of what you paid, up to $2,000. As long as the model you purchase has achieved the Consortium for Energy Efficiency's highest tier, it's easy money. Not only is the tax rebate yours, but you'll save money monthly as your heating bill drops.

A heat pump water heater comes with a tax rebate of up to $1,750, and if you decide to use a heat pump for heating and cooling, the rebate is up to $8,000 back. Energy-efficient electric cooktops also get in on the action with an $840 rebate.

The tax credit is available through the end of 2032 and the tax rebate through September 2031. These tax credits don't represent the only way to save money on energy; here are 10 other ways to save.

The Inflation Reduction Act represents the most significant amount the U.S. has ever spent to fight global warming. Given that the U.S. has released more emissions than any other country in history, finding ways to combat climate change feels like a long time coming. If everything works as it should, Americans will end up with cleaner air and a bit more money in the bank.

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