The Inflation Reduction Act of 2022, H.R. 5376, was signed into law by President Joe Biden on August 16th. Targeting health care, taxes and climate change, the $739 billion legislation includes a package for energy and conservation focused tax credits, tax provisions, and increased funding for the IRS.
In terms of energy incentives for individuals and businesses, the bill provides credits generally applicable for post 2022 returns including:
- Purchasing clean fuel vehicles (new and used);
- Making homes more energy efficient with rebates available for qualified expenses incurred by qualified individuals and entities;
- Making commercial buildings more energy efficient;
- Building/manufacturing more energy efficient homes;
- Producing clean energy and fuels.
In terms of health care, the act includes:
- Extends Premium Tax Credit amounts available to taxpayers in 2021 and 2022 through 2025. This specifically affects taxpayers with household income over 400% of the Federal Poverty Line as they will remain eligible through the extended period;
- Creates a limit and cap to various costs Medicare recipients pay for annual out-of-pocket prescriptions, insulin, and free vaccines; and
- Rein in the drug costs by requiring pharmaceutical companies raising prices on drugs purchased by Medicare faster than the rate of inflation to rebate the difference back into the Medicare program.
Aside from health care and energy incentives, the Act will affect businesses by doubling the amount of Research and Development Credit that can be applied against payroll taxes for qualified small businesses for post-2022 tax years. Going from $250,000 to $500,000 beginning after December 31st, 2022.
It will extend the excess business loss limitation for noncorporate taxpayers for an additional two years through the 2028 tax year as well as impose a 1% excise tax on certain stock repurchases applicable to stock repurchases after the 2022 tax year.
Most notably, the Act will impose an unprecedented 15% corporate minimum tax on corporations with an average financial statement income over $1 billion per year beginning in 2023 as well as $80 billion allocated to the Internal Revenue Service over the course of 10 years for improvements such as better technology, additional employees and increased enforcement and compliance.
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