The Inflation Reduction Act Could Lower Energy and Health Care Bills

How the bill may affect your finances

Person installing solar panels

Lourdes Balduque / Getty Images

The new Inflation Reduction Act (IRA) passed by the Senate on Sunday could mean lower energy bills, reduced health care costs, and tax breaks for going green. That is, unless you’re a large corporation or ultra-wealthy; in which case, you'll probably get taxed more.

Authors of the bill say it aims to tackle inflation by lowering costs for families and that it promises to reduce the federal deficit by about $300 billion over the next 10 years. Republicans say it will drive up prices and increase taxes.

Here are the major provisions and how they could affect your pocketbook.

Key Takeaways

  • The Inflation Reduction Act (IRA) offers rebates and tax credits to U.S. families who upgrade to energy-efficient appliances and vehicles.
  • Approximately 13 million Americans with health insurance under the Affordable Care Act could pay an average of $800 less a year on their premiums.
  • If you’re on Medicare, your out-of-pocket prescription drug costs will be capped at $2,000 a year, starting in 2025.

Rebates and Tax Credits for Households Investing in Clean Energy

One of the top priorities in the bill is to fight climate change. To do so, it calls for investing nearly $370 billion in measures intended to lower energy costs, increase cleaner production, and reduce carbon emissions by about 40% by 2030—the largest climate-change investment in the nation’s history.

Under the bill, low-income households can get rebates for installing or upgrading to energy-efficient appliances. The bill also offers consumers tax credits for 10 years for clean-energy upgrades on heat pumps, rooftop solar panels, and more efficient water heaters.


The bill would give lower- and middle-income individuals tax credits on new and used electric cars. For example, if you are part of a low- to middle-income household, you could get a $4,000 tax credit for buying a used electric car, and up to $7,500 if you buy a new one.

Soaring inflation has led to bigger bills for gas and energy, but the clean-energy initiatives in the IRA could lower those bills. According to an analysis of the IRA by Rewiring America, a nonprofit that advocates for energy efficiency, you could save up to $1,800 per year on energy bills by installing a modern electric heat pump to replace a furnace, as well as buying a heat pump for water, an electric car, and installing solar panels.

Lower Insurance Premiums and Prescription Drug Costs

For 13 million Americans with insurance under the Affordable Care Act, the bill aims to lower insurance premiums by an average of $800 a year. It would do so by giving a three-year extension to premium tax credits that were expanded during the COVID-19 pandemic with the American Rescue Plan. The bill also caps out-of-pocket spending for prescription drugs at $2,000 per year for Americans insured under Medicare, starting in 2025.

“No matter what their drug bills would otherwise be, seniors will not have to spend more than $2,000,” President Biden said in a statement on Sunday.

A survey conducted by The Balance in February on President Biden’s Build Back Better plan (an earlier version of the now-trimmed-down Inflation Reduction Act) showed strong bipartisan support for making health care more affordable, with 79% of those surveyed saying they think the government should lower prescription drug costs.

Will It Actually Reduce Inflation?

According to the statement by President Biden, the bill aims to pay for all of these initiatives by establishing a 15% corporate minimum tax on the wealthiest companies—those making $1 billion or more in annual revenue. Democrats say no new taxes will be imposed on small businesses or on families making $400,00 or less per year. Instead, the bill will close tax loopholes and enforce the tax code. It would give the IRS and related agencies nearly $80 billion ”to bolster taxpayer services and enforcement of the tax code,” according to the Congressional Research Service.


Taxing the rich was another BBB measure that had a lot of support in The Balance’s February survey, with 63% of those surveyed by The Balance saying the government should impose a 15% tax on corporate profits over $1 billion.

While the bill aims to reduce costs on energy bills and health care for American families whose wallets have already been stretched thin by the highest inflation rates seen in decades, the bill is unlikely to bring prices down anytime soon.

The Committee for a Responsible Federal Budget, a nonpartisan, nonprofit organization, expects the IRA to have “essentially no effect” on inflation in the short term, but said in a statement that it could lower the risk of persistent inflation over time and make it easier for the Federal Reserve to reduce inflation without making the economy go into a recession.

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  1. Senate Democrats. “Summary: The Inflation Reduction Act of 2022.”

  2. U.S. Department of Health and Human Services. “Statement by HHS Secretary Xavier Becerra on Senate Passage of the Inflation Reduction Act.”

  3. Joint Economic Committee Democrats. “The Inflation Reduction Act Lowers Healthcare Costs, Fights Inflation While Cutting the Deficit.”

  4. Senate Democrats. “Summary of the Energy Security and Climate Change Investments in the Inflation Reduction Act of 2022.”

  5. Rewiring America. “The Electric Explainer: Key Programs in the Inflation Reduction Act and What They Mean for Americans.”

  6. The White House. “Statement by President Biden on Senate Passage of the Inflation Reduction Act.”

  7. U.S. Senate. “H.R. 5376.”

  8. Congressional Research Service. “IRS-Related Funding in the Inflation Reduction Act.”

  9. Committee for a Responsible Federal Budget. “IRA Will Help Fed Fight Inflation.”

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