There are numerous features of the Inflation Reduction Act, but only a few that would be considered actionable for clients. Other aspects of the bill that are generally beneficial but not actionable are listed at the bottom of the list.
The details for many of these items are still unfolding, so please consult with your advisor at the time you are considering these credits. When it comes to these Green Initiatives credits, vendors are also a great resource to talk with.
There is a credit to make energy-efficient upgrades to your home. The credit is up to $1,200 or 30% of the total cost at tax time but does not go into effect until January 1st, 2023. This will replace the old $500 credit and cover such costs as installing insulation, windows, doors, roofing, and other miscellaneous energy-saving improvements. Aside from the increase in the amount, it has been expanded to include biomass stoves and boilers, electric panels, and home energy audits.
There had been a 26% credit, but that has now been raised to 30% retroactive for all of 2022 and continuing through 2032. This is for solar panels and battery storage. These are not refundable but can be carried forward.
Currently, the credit is up to $7,500 for new vehicles (must be assembled in North America and purchased/delivered by 12/31/2022. Starting in 2023, it will remain up to $7,500 with assembly in North America. Now though, the suggested retail price must be $80,000 or less for pickup trucks, vans, and SUVs and under $55,000 for other vehicles in order to receive the credit. Used cars now have a first-time credit of up to $4,000 (at least 2 years old and cost less than $25,000.
No changes. The $10,000 limit is set to expire 2025.
Medicare can now negotiate the price of certain drugs, which will bring down the price Medicare recipients pay. Also, starting in 2025 there is an annual $2,000 cap for out-of-pocket prescription drug costs.
The bill increases IRS funding by $87 billion over the next 10 years.
Premiums subsidies were increased through the American Rescue Plan Act (ARP) at the end of 2022. The bill extends those premiums through 2025.
Prior to ARP, those making up over 400% of the poverty level did not receive any subsidy on the ACA. The ARP act capped premiums for that group to 8.5% of their income. This extension is through 2025.
Corporations with at least $1billion in income will have a 15% minimum tax.
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